Bloomberg News

Occidental 3rd-Quarter Profit Rises on Record U.S. Output

October 27, 2011

(Updates with closing share price in third paragraph.)

Oct. 27 (Bloomberg) -- Occidental Petroleum Corp., the fourth-largest U.S. oil company, said record U.S. production and higher crude prices helped drive a 49 percent increase in third- quarter profit as global output fell.

Net income increased to $1.77 billion, or $2.17 a share, from $1.19 billion, or $1.46, a year earlier, Los Angeles-based Occidental said in a statement. Per-share profit exceeded the $1.96 average of 20 analysts’ estimates compiled by Bloomberg, the company’s biggest earnings surprise since 2009. Sales rose 26 percent to $6 billion.

Occidental shares rose 10 percent to $95.66 in New York., the most since Dec. 10, 2008. The stock, which has 18 buy ratings and six holds from analysts, has fallen 2 percent this year.

Occidental had a “solid beat” on both production and the price received for its oil and natural gas, Paul Sankey, a New York-based analyst for Deutsche Bank AG, wrote in a note today.

Chief Executive Officer Stephen I. Chazen continued to offer a cloudy forecast about the speed of permitting for new drilling in California, where Occidental’s prospects may hold as much as 10 billion barrels of oil.

“At this point, the program we have is all we can really count on from state permitting,” Chazen told investors in a conference call today. “Predicting what somebody in the state of California might do, it makes predicting oil prices easy.”

California Drilling

New drilling in California has been hampered by slower permitting and increased scrutiny from regulators, Catherine Reheis-Boyd, president of the Western States Petroleum Association, said in a telephone interview Oct 12.

Occidental’s output may decline this year for this first time since 2005, Thomas Driscoll, a Barclays Plc analyst, said in a July 27 note to clients.

Berry Petroleum Co., a Denver-based producer with operations in California, fell 13 percent today after Chief Executive Officer Robert Heinemann said the company was lowering its production targets because of permitting problems.

“Like other California producers, we are being impacted by today’s regulatory environment in California,” he said. Berry is investing in other areas to make up the difference, he said.

Crude Rises

Occidental’s crude production increase in California of 6.7 percent to 80,000 barrels a day will please investors, Ann Kohler, a managing director at CRT Capital Group LLC in Stamford, Connecticut, said in a phone interview today.

Kohler rates Occidental a “buy” and doesn’t own the shares.

Benchmark U.S. crude oil rose 17 percent to average $89.54 a barrel on the New York Mercantile Exchange during the quarter, from $76.21 a year earlier, according to Bloomberg data. Brent crude prices, an international benchmark, rose 46 percent to average $112.09 a barrel in the third quarter.

Occidental’s global production in the quarter fell to the equivalent of 739,000 barrels of oil a day from 756,000 barrels a year earlier, before the company sold some Argentine assets. Third-quarter U.S. crude and natural-gas production was the most in the company’s history, with output increasing from fields in California, the Rocky Mountains and Texas.

Problems in the Middle East and North Africa will continue to crimp non-U.S. production, Chazen said. The company may soon increase output in Iraq and Libya, he said.

The company sold an average of 743,000 barrels of oil equivalent a day, in the quarter, and received an average of $97.24 a barrel compared with $72.31 a year earlier, according to the statement. Profit in Occidental’s chemicals business rose 30 percent to $245 million.

Exxon Mobil Corp., Chevron Corp. and ConocoPhillips are the three largest U.S. oil companies.

--With assistance from Jim Polson in New York. Editors: Charles Siler, Tina Davis

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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