Despite taking a hit from Gulf of Mexico storms in the third quarter, Occidental Petroleum Corp. said Monday higher commodity prices lifted third quarter earnings to $1.747 billion ($4.32/share), more than double the $758 million ($1.91) reported in 3Q2004. The Los Angeles-based major also reported a 13% rise in domestic natural gas production from fields in California, the Hugoton Basin and the Permian Basin.
The company has been more aggressive in expanding its holdings overseas, and in July it became the first U.S. oil company to ramp up operations in Libya. However, U.S. exploration remains a priority. In mid-October, Occidental announced a $3.8 billion merger with Vintage Petroleum Inc. to strengthen its base in California, the Middle East and Latin America (see Daily GPI, Oct. 17). CEO Ray Irani said Monday the Vintage acquisition was part of a plan to set up the potential for above-average production growth going forward.
Within its four core production areas of the United States, three showed improvement in gas output. Compared with 3Q2004, production rose in California to 239 MMcf/d from 228 MMcf/d, in the Hugoton Basin to 133 MMcf/d from 124 MMcf/d, and in the Permian Basin to 186 MMcf/d from 122 MMcf/d.
The only asset showing gas declines in the quarter was in Horn Mountain, Occidental's only Gulf of Mexico field, which was down 57% at 6 MMcf/d from 14 MMcf/d in 3Q2004.
In a conference call on Monday, CFO Stephen Chazen said Horn Mountain was "significantly impacted" by the hurricanes, but its "production facilities and pipelines were not harmed." However, "damage to the infrastructure on shore halted and subsequently limited production.''
In the third quarter, oil and gas segment earnings were $1.760 billion, compared with $1.216 billion for 3Q2004, a 45% increase. In 3Q2005, Occidental was hit with a $9 million insurance premium increase related to hurricanes in the Gulf. After adjusting for the impact of the storm increases, core earnings were $1.769 billion. The improvement in core earnings included $692 million from higher worldwide crude oil and gas prices, partially offset by higher operating, exploration and other costs.
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