Occidental's Profit Rises on Energy Trading and Chemicals Business Growth

Occidental Petroleum Corp., the U.S. oil producer that bought Citigroup Inc.’s Phibro energy-trading business last year, said third-quarter profit from its trading and chemical units helped the company beat estimates.

Net income from continuing operations increased to $1.19 billion, or $1.46 a share, from $927 million, or $1.14, a year earlier, the Los Angeles-based company said today in a statement. Per-share profit was 10 cents higher than the average of 15 analysts’ estimates compiled by Bloomberg.

Profit from Occidental’s midstream and marketing business, which includes Phibro, pipelines and gas-processing units, more than doubled from the same period last year. The chemicals unit also more than doubled its profit, according to the company.

“Oil and gas production was largely in line with our expectations, so the core business really didn’t drive the outperformance,” said Jim Byrne, an analyst at BMO Capital Markets in Calgary who rates the shares “outperform” and doesn’t own any.

Oil price “weakness” may keep Occidental’s shares down today, he said. Crude prices fell as much as 2.9 percent today, the most in seven weeks, after China raised benchmark interest rates.

Occidental fell $5.18, or 6.1 percent, to $80.27 at 2:02 p.m. in New York Stock Exchange composite trading. The stock, which before today had gained 5 percent this year, has 17 buy ratings from analysts and four holds.

Futures Prices

Occidental’s sales rose 19 percent to $4.9 billion. The company said it increased oil and natural-gas production by 6.5 percent to the equivalent of 751,000 barrels of crude a day. Occidental received $70.71 a barrel for oil, a 13 percent increase from the price for the same period last year.

Oil futures traded in New York climbed 12 percent from a year ago to average $76.21 a barrel during the July-to-September period. Demand for crude in the U.S., the world’s largest oil consumer, rose enough to fill a supertanker every five days, according to Energy Department figures.

“Crude demand improved for the second consecutive quarter,” Brian M. Gibbons, a New York-based analyst at CreditSights Inc., said in an Oct. 15 note to clients.

Occidental may reevaluate its U.S. gas drilling plan for 2011, and it likely will slow gas drilling in the Rockies next year, Chief Operating Officer Stephen I. Chazen said today on an investor conference call. Chazen said the company is shifting to more of an oil base in the intermediate term because of low gas prices.

Spending on Acquisitions

Occidental spent $1.1 billion on acquisitions in the third quarter and sees spending another $300 million in the first part of the current quarter, Chazen said.

The purchases will add 10,000 barrels of oil equivalent to average daily output in the fourth quarter and at least 25,000 barrels a day during the next three years, he said.

Chazen said the bulk of the acquisitions were in the Permian Basin, an oil and gas formation in New Mexico and Texas. Occidental plans to add 380,000 acres in California and an interest in 100,000 acres in other producing areas, he said.

Occidental’s production is expected to be 760,000 to 770,000 barrels of oil equivalent a day in the fourth quarter, if prices are at third-quarter average levels, Chazen said.

Chazen will become chief executive officer when current CEO Ray R. Irani steps down in May, the company said last week.

To contact the reporter on this story: Joe Carroll in Odessa, Texas, at jcarroll8@bloomberg.net.

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

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