Occidental’s Profit Soars 53% to Record High on Surging Oil Prices

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Buoyed by booming energy prices and output, Westwood-based Occidental Petroleum Corp. said Thursday that first-quarter profit leaped 53% to an all-time high.

Analysts predicted continuing good fortune for the company but warned that a slowing global economy could lower demand and prices for crude oil, which averaged $98 for the January-March quarter.

Advocacy groups complained that the rosy outlook for Occidental and other oil companies came at a steep price: drivers’ suffering.

Judy Dugan, research director of Consumer Watchdog in Santa Monica, said oil companies’ profits show "an industry operating in an economic bubble with no connection to the pain its prices are causing in the rest of the economy."

Net income for Occidental, the fourth-largest U.S. oil company, vaulted to $1.85 billion, or $2.23 a share, from $1.21 billion, or $1.43, a year earlier. Analysts surveyed by Thomson Financial had expected income of $1.98 a share.

Houston-based ConocoPhillips, the third-largest U.S. oil company, reported Thursday that first-quarter net income jumped to $4.14 billion, or $2.62 a share, from $3.55 billion, or $2.12, in the year-earlier quarter. The company would have done even better, executives said, if its refineries and service stations had been able to pass along more of oil’s rapid price increase.

At Occidental, a 50% sales surge to $6.02 billion from $4.02 billion in the year-earlier quarter suggested that 2008 could overtake 2007 as the most successful year in the company’s history, Chief Executive Ray R. Irani said.

Compared with $1.88 billion in first-quarter operating earnings last year for its oil and gas segment, Occidental pulled in $2.89 billion this year, offset by higher operating expenses. The company’s production is more than 80% oil.

The total for last year’s period includes funds from a $412-million sale of a joint venture in Russia and $109 million from legal settlements, including a large tax payment from Ecuador over a property dispute.

The rapid run-up in oil prices over the last two months has squeezed refiners, which have struggled to transfer skyrocketing oil costs to consumers, Citigroup analyst Doug Leggate said.

But with no refining operation and a business model that touts disciplined investment and aggressive international growth, Occidental should expect smooth sailing.

"Occidental has been the most profitable company in the sector, bar none," Leggate said. "If any company deserves this, it’s them."

Occidental’s production of oil and natural gas increased to a daily average of 607,000 barrels of oil equivalent from 560,000 a day in the first quarter of last year, mainly because of output from its shared Middle East Dolphin natural gas project.

Occidental executives said they hoped to boost production to as many as 620,000 barrels a day in the second quarter, assuming oil at $100 a barrel. The company commanded $86.75 per barrel of crude during the quarter, up 68% from $51.67 last year.

Occidental’s shares fell $1.66, or 2%, to $82.83, on a day when most oil companies lost ground in reaction to lower oil prices.
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