Third quarter earnings announced by three more major producersThursday showed income declines from the previous third quarterranging from 37% to 79%. Not surprisingly, Shell, Chevron, andPhillips Petroleum all cited weak commodity prices for their poorperformances.

“Lower prices for crude oil, natural gas and all majordownstream oil and chemical products continued to depressearnings,” said Shell President Jack E. Little, whose company’s netincome was off 46%. “Market conditions have deteriorated evenfurther since the second quarter of this year, with average crudeoil prices at their lowest level in 12 years.”

Shell’s domestic gas prices averaged $1.88/Mcf in the thirdquarter, down 40 cents from the year-ago period. Domestic gasproduction was down 4% in the quarter-to-quarter comparison but up8% for the first nine months of this year. Downstream gas, a newShell operating segment, had earnings for the third quarter of $10million. During the third quarter, transported gas volumes wereabout 6,237 MMcf/d, down about 9% from the second quarter of thisyear. (The business segment did not exist last year.) Gasprocessing throughputs were about 76,000 barrels/d, down almost 30%from last quarter, and gas processing margins declined sharply,both due to adverse market conditions, Shell said.

“Earnings continue to suffer from the depressed crude oil pricesthat have plagued our industry for the past year,” lamented ChevronCEO Ken Derr, whose company’s income was off 37%. Chevron had netincome of $461 million, or 70 cents/share, compared to $727million, or $1.10 cents/share, in Q3 1997. Things don’t look likethey’ll be getting better anytime soon, Derr noted.

“The fourth quarter will be a difficult one. Our results willcontinue to be affected negatively by low crude oil prices and lowmargins on refined products and chemicals, since we do not foreseeany significant near-term improvement in these areas.” Chevronaverage third quarter domestic gas prices were $1.92/Mcf, off 28cents from the year-ago period. Declines in domestic gas andliquids production were attributable mainly to property sales andcurtailments resulting from weather-related shutdowns in the Gulfof Mexico in September.

Phillips net income was off a whopping 79% to $46 million, or 18cents/share, compared to $216 million, or 82 cents/share, in 3Q1997. Exploration and production net operating income was $52million, down from $146 million in the year-ago quarter, mainly dueto lower prices for oil and gas and lower production. Phillipsdomestic gas production sold for an average of $1.75/Mcf, down from$2.15/Mcf in 3Q 1997.

Shell, Chevron, and Phillips joined Texaco, Amoco, and Exxon,who released earnings Wednesday (See Daily GPI Oct. 22, 1998), inthe depressing earnings report club, which is sure to grow as morecompanies release results.

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