Some major U.S. independent producers absorbed major blows tothe bottom line in the first quarter of 1999, but CEOs from thecompanies insist higher profits are right around the corner.

Occidental Petroleum Corp. recently posted first quarterearnings of a $70 million net loss compared to a profit of $177million in the same period of 1998. Overall sales were down $400million from the first quarter of 1998, finishing at $1.3 billion.Oil and gas earnings fell from $127 million in 1Q98 to $63 millionfor this past quarter. The hardest hit division was Occidental’schemical operations which earned $9 million in the first threemonths of 1999, compared to $158 million in 1998’s first quarter.

CEO Ray Irani said the tables are turning in a positivedirection. “First quarter 1999 results reflected lower oil and gasprices and lower chemical margins compared to the same quarter in1998. The recent rise in oil prices, if sustained, should have asignificant impact on our earnings as Occidental has become moreleveraged to changes in oil prices.”

Burlington Resources said it lost $10 million in 1Q99, down froma profit of $48 million in 1Q98. Burlington’s natural gas salesfell 83 MMcf/d from 1.648 Bcf/d in 1Q98 to 1.565 Bcf/d in 1Q99.Production volumes were negatively affected because lower pricesforced Burlington to cut capital spending, which decreased Gulf ofMexico activity.

Burlington said its natural gas price averaged $1.88/Mcf overthe last quarter, which is a 7% drop from the $2.03/Mcf average of1Q98. Oil prices fell 31% from $15.26/Boe in 1Q98 to $10.55/Boe in1Q99 causing an 11,600 barrel drop in production in the firstquarter of this year.

Although natural gas prices were partly to blame for this year’spoor first quarter, Bobby Shackouls, CEO of Burlington, said theyalso will bring the company back. Gas prices bottomed out in thelow $1.70s in late January, but have rebounded into the low $2.20srecently.

“We’re pleased with the recent rise in oil prices that resultedfrom OPEC’s announced production cuts and we are particularlyoptimistic about the outlook for North American natural gas prices,especially considering our heavy weighting toward domestic gasproduction.”

Thomas Usher, Marathon Group’s CEO said the recovery could lastthrough the rest of 1999. “Recent actions taken by OPEC.combinedwith improvements in downstream margins offer a positive outlookfor the second quarter and the balance of 1999.”

Like its fellow producers, Marathon was unable to escape thedreary first quarter. Net income was down from $183 million in 1Q98to $119 million in 1Q99. Adjusted for special items, including the$136 million sale of Scurlock Permian LLC, a crude oil transport,trading and marketing company, Marathon experienced a net loss of$11 million for the quarter.

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