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Occidental Petroleum Third Quarter Review
Occidental Petroleum (NYSE:OXY) benefited from higher oil and gas production and strong chemical, trading and marketing results in the quarter ending Sept 30, 2010. The company is also accelerating its exploration and development of assets in California and Texas.
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Summary
Occidental Petroleum reported average production of 751,000 barrels of oil equivalent (BOE) per day in the third quarter, a 6.5% increase over the same quarter of 2009. The company also benefited from higher realized prices during the quarter.
Occidental Petroleum received $70.71 per barrel for oil and $4.20 per Mcf for natural gas. In the same period in 2009, Occidental Petroleum received $62.79 per barrel and $3.04 per Mcf.
Occidental Petroleum also reported a third quarter net income of $1.19 billion or $1.46 per diluted share. The company earned $929 million or $1.14 per diluted share in the third quarter of 2009.
Chemical Segment
Occidental Petroleum also has a large chemicals business and is involved in the chlor-alkali business. Occidental Petroleum earned $189 million in this segment in the third quarter of 2010, up from $72 million in the same quarter of 2009. Utilization in the chlor-alkali business has been improving with the economy and reached 91% in September 2010.
Other companies involved in the chlor-alkali business include Dow Chemical (NYSE:DOW), which is the largest producer with a capacity of 3.9 million tons, and Olin (NYSE:OLN), which has a capacity of 1.9 million tons.
Midstream Segment
Occidental Petroleum also saw its 2010, Q3 earnings in its midstream segment more than double last year's $77 million to reach $163 million. The midstream segment contains the Phibro trading business, which was purchased from Citigroup (NYSE:C).
Acquisitions
Although Occidental Petroleum already has an immense land position in the U.S., the company is continuing to acquire additional acreage. The company spent $1.1 billion in the most recent third quarter and plans to spend an additional $300 million in the final quarter of 2010.
These acquired properties currently produce 12,000 BOE per day, and Occidental Petroleum expects to add another 25,000 BOE per day in the medium term. The company is not stopping here, and plans to add 380,000 acres in California, bringing its total in the state to 1.6 million acres.
Occidental Petroleum is also adding another 100,000 acres in other undisclosed producing areas. Some of this acreage may be in the Permian Basin, where the company has a large base of operations.
Exploration and Development
Occidental Petroleum plans to ramp up development in California and the Permian Basin for the balance of 2010 and into 2011. The company is operating 16 rigs in California and expects to exit 2010 with 19 rigs. In 2011, Occidental Petroleum will be operating 21 rigs in the state. The Permian Basin is also ramping up, from the current nine, to 14 by the end of 2010 and up to 15 in 2011.
The Bottom Line
Occidental Petroleum turned in healthy production growth in the most recent quarter, along with strong chemical and midstream earnings. The company is moving to explore and develop the immense portfolio it has assembled in North America. And with plans to acquire more land in established oil-producing regions, Occidental appears determined to remain a major player in oil and gas production. (To learn more, see our Oil And Gas Industry Primer.)
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IN PICTURES: 9 Simple Investing Ratios You Need To Know
Summary
Occidental Petroleum reported average production of 751,000 barrels of oil equivalent (BOE) per day in the third quarter, a 6.5% increase over the same quarter of 2009. The company also benefited from higher realized prices during the quarter.
Occidental Petroleum received $70.71 per barrel for oil and $4.20 per Mcf for natural gas. In the same period in 2009, Occidental Petroleum received $62.79 per barrel and $3.04 per Mcf.
Occidental Petroleum also reported a third quarter net income of $1.19 billion or $1.46 per diluted share. The company earned $929 million or $1.14 per diluted share in the third quarter of 2009.
Chemical Segment
Occidental Petroleum also has a large chemicals business and is involved in the chlor-alkali business. Occidental Petroleum earned $189 million in this segment in the third quarter of 2010, up from $72 million in the same quarter of 2009. Utilization in the chlor-alkali business has been improving with the economy and reached 91% in September 2010.
Other companies involved in the chlor-alkali business include Dow Chemical (NYSE:DOW), which is the largest producer with a capacity of 3.9 million tons, and Olin (NYSE:OLN), which has a capacity of 1.9 million tons.
Occidental Petroleum also saw its 2010, Q3 earnings in its midstream segment more than double last year's $77 million to reach $163 million. The midstream segment contains the Phibro trading business, which was purchased from Citigroup (NYSE:C).
Acquisitions
Although Occidental Petroleum already has an immense land position in the U.S., the company is continuing to acquire additional acreage. The company spent $1.1 billion in the most recent third quarter and plans to spend an additional $300 million in the final quarter of 2010.
These acquired properties currently produce 12,000 BOE per day, and Occidental Petroleum expects to add another 25,000 BOE per day in the medium term. The company is not stopping here, and plans to add 380,000 acres in California, bringing its total in the state to 1.6 million acres.
Occidental Petroleum is also adding another 100,000 acres in other undisclosed producing areas. Some of this acreage may be in the Permian Basin, where the company has a large base of operations.
Exploration and Development
Occidental Petroleum plans to ramp up development in California and the Permian Basin for the balance of 2010 and into 2011. The company is operating 16 rigs in California and expects to exit 2010 with 19 rigs. In 2011, Occidental Petroleum will be operating 21 rigs in the state. The Permian Basin is also ramping up, from the current nine, to 14 by the end of 2010 and up to 15 in 2011.
The Bottom Line
Occidental Petroleum turned in healthy production growth in the most recent quarter, along with strong chemical and midstream earnings. The company is moving to explore and develop the immense portfolio it has assembled in North America. And with plans to acquire more land in established oil-producing regions, Occidental appears determined to remain a major player in oil and gas production. (To learn more, see our Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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