Oxy's 2008 earnings hit record high

By OGJ editors

HOUSTON, Jan. 29 -- Los Angeles-based Occidental Petroleum Corp.'s 2008 earnings were the highest in the company's history, despite the sharp drop in oil and gas prices during the fourth quarter, said Ray R. Irani, chairman and chief executive.

Oxy earned $6.857 billion or $8.35/diluted share in 2008, up from $5.4 billion or $6.44/diluted share in 2007. Its fourth quarter earnings totaled $443 million {55¢/diluted share) in 2008, down from $1.45 billion ($1.74/diluted share) during the same period a year ago.

Company officials announced a 2009 capital budget of $3.5 billion "for the future growth of the company, despite volatile commodity prices." Irani said, "We believe that with this level of capital, we will achieve our targeted returns in the current price environment as well as grow our production volumes in 2009, 2010, and beyond."

Oxy's new budget is "an anticipated decline from the nearly $4.7 billion spent last year," said analysts in the Houston office of Raymond James & Associates Inc. "Occidental posted fourth-quarter operating earnings of $1.18/diluted share, handily beating our estimate of $1.01 and consensus of 95¢. Revenues came in well shy of our expectations, due mainly to lower price realizations, with better-than-anticipated operating costs picking up the slack. Reported net income of 55¢/diluted share [for the quarter] included a significant amount of impairment charges in both the E&P and chemical segments," analysts said.

Irani said Oxy's production increased by 5.4% to 601,000 b/d of oil equivalent in 2008.

"In the fourth quarter, we completed the acquisition of the remainder of Plains Exploration's interests in the Permian and Piceance basins. We announced the signing of a preliminary agreement to develop the Jarn Yaphour and Ramhan oil and gas fields in the Emirate of Abu Dhabi and the signing of an exploration and production-sharing agreement to develop existing gas fields in Northern Oman. Additionally, earlier this month we were selected from among several international companies to develop oil and gas reserves in the Kingdom of Bahrain," Irani said.

Earnings from Oxy's oil and gas segment dropped to $339 million during the fourth quarter, compared with $2.46 billion for the same period in 2007. For the year, the oil and gas segment earned $10.65 billion, compared with 2007 earnings of $7.96 billion.

Daily oil and gas sales averaged 620,000 boe in the fourth quarter of 2008, compared with 590,000 boe in the same period in 2007. For all of 2008, daily oil and gas volumes averaged 601,000 boe, compared with 570,000 boe in 2007.

Oxy's realized price for worldwide crude averaged $53.52/bbl in the latest quarter, down from $80.30/bbl in the fourth quarter of 2007. The realized US gas price was down to $4.67/Mcf in the last quarter of 2008 from $6.77/Mcf a year ago. For all of 2008, Oxy's realized price for worldwide crude oil averaged $88.26/bbl, compared with $64.77/bbl for 2007. US gas prices averaged $8.03/Mcf over the 12 months of 2008, up from 2007's average price of $6.53/Mcf.

Oxy's midstream segment earnings were $170 million for fourth-quarter
2008, compared with $138 million for fourth-quarter 2007. The 2008 quarterly earnings reflect higher margins in crude oil marketing, increased pipeline income from Dolphin, and lower natural gas liquids margins in gas processing. For the whole year, Oxy's midstream segment earnings climbed to $520 million, compared with $367 million for 2007.

Oxy's chemical segment earned $127 million in fourth-quarter 2008, compared with $94 million for the same period in 2007. Annual earnings from chemicals totaled $669 million, up from $601 million in 2007.

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