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Oil picture mixed in 3Q
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October 25, 1999: 12:54 p.m. ET
Big producers and refiners post higher profits, but not all are on target
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NEW YORK (CNNfn) - Several of the nation's biggest oil producers reported higher third-quarter earnings Monday, bolstered by sharp gains in crude oil prices, but not all of them hit analysts' forecasts.
Industry leader Exxon Corp. said its net income rose 7 percent, its merger partner and No. 2 Mobil Corp. reported a 42-percent jump in operating profit, third-ranked Texaco Inc. said operating profit soared 118 percent, and No. 4 Chevron said income before one-time items rose 82 percent.
Big oil refiners, which raced to merge last year to brace against falling crude oil prices, have seen a sharp rebound in prices take hold over the summer, due mainly to production cuts by the key OPEC oil-producing nations. That boosted profit margins.
But Wall Street's reaction was muted. Among the sector's Dow industrial issues, Exxon (XON) fell 1-1/8 to 75-3/4 and Chevron (CHV) dropped 1-5/8 to 92-1/8. Texaco (TX) lost 1-7/16 to 61-7/16; Mobil (MOB) shed 2-1/2 to 99-1/2.
One analyst said the market dip is no surprise.
"We're going to see continued volatility in the near term -- the oil market is sending conflicting signals," said Jay Wilson, an oil analyst at J.P. Morgan. He said OPEC nations have been unified to keep a cap on output and inventories are slimmer -- both friendly to producers -- but OPEC has shut in about 6 million barrels of inventory that it's likely to release; the main question is when.
With crude oil prices above a strong $20 per barrel level, Wilson said, "investors may be saying 'it doesn't get much better than this, so let me take some money off the table and wait until some of the uncertainty flushes out.' After that, the stocks are back off to the races again."
The Exxon tiger purrs
Exxon, the nation's largest oil company, said its third-quarter earnings rose 7 percent as it topped analysts' estimates with its best quarter in 15 years for exploration and production income.
Irving, Texas-based Exxon, which is awaiting approval of a merger with its rival Mobil, earned $1.5 billion, or 61 cents per diluted share, up from $1.4 billion, or 58 cents a share, a year ago.
Analysts expected Exxon to report third-quarter 1999 earnings of 59 cents per share, according to First Call Corp., which tracks such estimates. Revenue rose 16 percent to $33 billion.
Exxon credited what it said was an $8-per-barrel jump in the price of crude oil from the third quarter last year. Earnings from "upstream" operations, or exploration and production activities, were the highest in 15 years, Exxon said.
However, Exxon said its income from "downstream" operations, or refining and marketing activities, was the lowest in a decade.
For the first nine months of 1999, however, Exxon said earnings fell to $3.7 billion, or $1.52 per diluted share, from $4.8 billion, or $1.96 a share, a year earlier. Revenue rose 2 percent to $89.4 billion.
Mobil profits on the move
Mobil, meanwhile, said operating profit rose 42 percent as the company was able to cut costs even though its downstream operations didn't get any benefit from higher crude oil prices.
The Fairfax, Va.-based company earned $795 million, or 87 cents per diluted share, compared with $497 million, or 61 cents per share, a year earlier. Analysts expected a profit of 89 cents per share.
Revenues rose 20 percent to $16.4 billion.
Including a one-time charge of $17 million connected with the Exxon merger, Mobil said net income was $688 million, or 85 cents per common share.
That was up from $509 million, or 63 cents per share, a year ago, when Mobil had a special benefit of $12 million tied to the sale of a European asset sale.
Mobil said its per-barrel expenses fell 6 percent. But unscheduled lags in refining operations have cost some $40 million so far this year.
For the first nine months of the year, Mobil reported earnings of $1.90 billion, or $2.36 a share, up from $1.86 billion, $2.28 per share, a year earlier. Revenue rose 6 percent to $42.8 billion.
The Texaco star brightens
Meanwhile, Texaco said third-quarter operating income jumped 118 percent on solid results in its upstream and downstream operations, but still fell a penny short of Wall Street expectations.
White Plains, N.Y.-based Texaco, the nation's No. 3 oil company, said earnings before one-time items rose to $453 million, or 83 cents per diluted share, from $208 million, or 37 cents a share, a year ago.
Analysts expected earnings of 84 cents a share. Revenue rose 25 percent to $9.7 billion.
Excluding one-time items, such as an $80 million loss related to a sale of assets in the third quarter of 1999, Texaco reported income of $387 million, or 71 cents a share, up from $215 million, or 38 cents per share, a year ago.
For the first nine months of the year, Texaco reported net income of $859 million, or $1.56 per share, up from $791 million, or $1.42 a share, a year earlier. Revenue rose 5 percent to $25.1 billion.
Chevron soars past targets
No. 4 Chevron, which recently walked away from merger talks with Texaco, posted an 82-percent rise in operating earnings and easily topped Wall Street expectations.
The San Francisco-based company said third-quarter earnings before special items rose to $702 million, or $1.07 a diluted share, from $386 million, or 59 cents per diluted share, a year earlier. Analysts expected $1.01 per share.
Revenues rose 32 percent to $10 billion.
Chevron said that aside from $120 million in costs related mainly to a loss on a sale and asset write-downs, net earnings rose to $582 million, or 88 cents per diluted share, up from 461 million, or 70 cents per share, a year earlier.
For the first nine months of the year, Chevron reported net income fell to $1.3 billion, or $1.91 a diluted share, from $1.5 billion, or $2.35 per diluted share, in the year-ago period.
Arco profit blasts off
Shares of Atlantic Richfield (ARC), which is poised to merge with Anglo-American BP Amoco, lost 1-3/4 to 92-1/4, even though the No. 6 oil company reported a six-fold increase in earnings for its third quarter.
The Los Angeles-based company, also known as Arco, said profits before special items rose to $511 million, or $1.55 a diluted share, from $73 million, or 22 cents a share, a year earlier.
Analysts forecast it would post earnings of $1.23 per share. Revenues rose 26 percent to $3.5 billion.
However, including $175 million in charges tied to its sale of a stake in an Algerian oil field, Arco said net income fell to $372 million, or $1.13 per share. That was down from $872 million, or $2.71 per share, in the year-ago period, when the company tallied $900 million when it sold its chemicals business.
For the first nine months of the year, Arco reported earnings of $850 million, or $2.59 per share, down from $1.2 billion, or $3.81 per share, a year ago. Revenue rose 15 percent to $9.3 billion. 
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Exxon
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Chevron
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