Occidental Petroleum Profit Soars 28% in Q3
21st October 2010
Occidental Petroleum Corporation beat the analysts’ expectations for the third quarter as net earnings surged 28 percent. This surge was concurrent with record oil and gas production and slightly higher commodity prices. Production rose 6.5 percent to 751,000 barrels of oil equivalent per day. This is just within the range of 750,000 to 760,000 barrels per day target the investors were assured since May of this year.
Occidental, just like several other oil and gas companies, has benefitted in large part by stronger commodity prices. The third quarter average price for oil was almost $72 per barrel which represents a 13 percent increase in price over the same quarter of 2009.
Occidental has significant presence in the US, where 60 percent of the company’s production takes place. About 75 percent of the company’s total output is oil.
The one spot which needs improvement is Occidental’s California production of gas. It is a key area for the company’s future growth. The third quarter saw a slip of 2 percent in production from the second quarter - an area which Occidental must continually demonstrate strength in for investors to maintain their support and enthusiasm.
Occidental COO Stephen Chazen will be replacing CEO Ray Irani next year. Chazen spoke with confidence while on a conference call with analysts about production levels in the fourth quarter. He said the company was relying heavily on the acquisitions made and activity within California. He also mentioned the company will be shifting its focus toward the drilling of oil, since gas is currently trading at record lows.
Chazen commented on the plans Occidental had involving the US, saying: “In the current environment we are cautious about natural gas drilling and may reevaluate our 2011 US natural gas drilling program.”
Occidental plans on investing around 300 million in acquisitions during the fourth quarter of this year. They are adding almost 400,000 acres to its California holdings, as well as 100,000 acres in producing land elsewhere in the US.
Chazen thinks the added investments will provide 10,000 barrels of oil equivalent per day and about 25,000 barrels of oil equivalent over the next three years.
Earnings for the independent oil and gas company reached 1.19 billion during the third quarter. Last year, the company reported 927 million during the same quarter.
Irani has taken a mid level market company and turned it into something substantial. In a conference call to investors recently, the 77 year old CEO commented on the growth of Occidental over the years, saying: “Our management team has transformed Occidental from a conglomerate of unrelated business entities with a market capitalization of $5 billion into the fourth largest oil and gas company in the US with a market capitalization of $67 billion.”
An analyst at Argus Research, Phil Weiss, commented on Occidental, saying: “They are generating a lot of cash, which gives it a lot of opportunities for future growth.” Weiss also mentioned that Occidental was focusing on the side of the business which provided more profits - oil production.
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