Occidental Petroleum said Wednesday that its third-quarter profits sank 24 percent, due mostly to sagging crude prices and increased domestic operating costs.
The Houston-based exploration and production company said profits dipped to $1.2 billion, or $1.55 per share, compared to $1.5 billion, or $1.96 per share, in the same period in 2013. Revenue decreased from $6.4 billion to $6 billion.
Domestic oil production in the third quarter increased 7 percent over 2013 to 282,000 barrels per day, a record number for the company, mainly from Occidental’s holdings in the Permian Basin and in California. The company’s total daily oil and gas production increased 6,000 barrels of oil equivalent.
Occidental said in a statement that operating costs increased because of “downhole maintenance and surface operations activities as well as higher costs for carbon dioxide, steam and power.”
Dropping crude prices and a supply glut in the United States have also foreshadowed weaker earnings for oil producers — benchmark U.S. crude futures averaged $97.25 a barrel in the third quarter, an 8.1 percent decline from 2013.
Occidental announced Tuesday that profits from its California oil producer, California Resources Corp., which will be spun off to shareholders in November, dropped to $188 million in the third quarter from $235 million the year before.
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“For the fifth consecutive quarter, we have delivered strong year-over-year domestic oil production growth, bolstered by strong results from Permian Resources, which grew by over 26 percent,” Occidental CEO Stephen Chazen said in a statement. “During the quarter, we have experienced about a 6 percent decline in our worldwide oil realized prices, due to volatility in the marker prices.”
The company also said international daily average production dipped 11,000 barrels after “field and port strikes in Libya and lower cost recovery barrels in Iraq.”
In an earnings conference call on Thursday, Chazen said he viewed the downturn in oil prices as a positive, saying he viewed this period as an advantageous time to use Occidental’s balance sheet to grow the business through acquisitions, especially in the Permian Basin.
“From our perspective, this is good times,” Chazen said. “I know what to do at $70 oil, but I have no idea what to do at $120 oil.”
He said Occidental over the next year will shift its investments from projects in the Middle East, like the Al Hosn natural gas project in Abu Dhabi, to Permian assets like the BridgeTex pipeline that came online in September.
“We’re down sizing the importance of that project within the company,” Chazen said of Al Hosn project, a development on the Shah Arab field sour gas reservoir. He said no matter the timing of the project “a lot of cash is going to come out of that business one way or another.”
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