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Oil companies' 3Q runs dry
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October 21, 1998: 1:11 p.m. ET
Texaco, Amoco and Exxon earnings collapse on thinning crude oil prices
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NEW YORK (CNNfn) - Three of the nation's largest oil companies reported a dramatic drop in third-quarter earnings Wednesday, some down more than 50 percent, as world oil prices continue to hover at or near bargain-basement levels.
All three companies -- Texaco, Amoco, and Exxon -- came within a few pennies of Wall Street estimates, however, and some analysts following the industry say they may have put the worst behind them.
"It was a terrible quarter, but there were no real surprises," said Bear Stearns analyst Frederick P. Leuffer, Jr. "Our bet is that the third quarter will represent the bottom. We anticipate further improvement in oil prices, gas prices and refining margins."
He said shrinking inventories of oil worldwide should pump up oil prices going forward.
Misery loves company
On the heels of Exxon's 23 percent earnings decline Wednesday, Texaco followed with reported net income of $215 million, or 38 cents per share.
That was down 53 percent from net income of $490 million, or 90 cents per share, for the year-ago quarter.
Texaco Chairman and Chief Executive Peter Bijur blamed the decline on violent weather patterns and slumping crude oil prices.
"Average crude oil prices for the quarter reached a low point not seen since mid-1986," Bijur said. "OPEC efforts to reduce production and lower inventory levels caused crude prices to rebound somewhat from their summer lows. However, prices have recently retreated and remain significantly below last year's levels. Storms in the Gulf of Mexico caused temporary production shut-ins, which further dampened earnings."
But Leuffer said the sector is suffering from myriad factors that go far beyond plummeting oil prices.
"There's been a downturn in everything -- oil prices, gas prices, chemical margins and refining margins," he said. "They are all down across the board."
Amoco Corp.'s financial performance didn't fare any better in the third quarter.
The company Wednesday reported net income of $295 million, or 31 cents per diluted share, for the third quarter. That's more than 50 percent lower than Amoco's profit of $635 million, or 64 cents per share, last year.
Analysts, factoring in industry pressures, expected the company to earn 32 cents a share, according to First Call consensus estimates.
Amoco's revenue reached $7.5 billion for the quarter, down from nearly $9 million last year.
For the nine months, Amoco posted earnings of $968 million, or $1.01 per diluted share, down from $1.9 billion, or $1.95 per share, last year.
Crude oil prices have fallen about 40 percent since they began their nose dive last fall. Prices per barrel closed Tuesday at $13.43, compared with $20.68 a year ago. Oil prices rallied briefly to around $16 per barrel several days ago, but have fallen back down since.
"Prices are in the toilet," said Chris Kelley, a spokesman for the American Petroleum Institute. "Everything I've read and everyone I've talked to in the industry, they all anticipate and seem to be preparing for these low-low prices to continue through most of or much of 1999."
Kelley noted that oil prices aren't the problem affecting the industry, but rather the symptom..
"The real problem here is the fact that Asian countries that were doing so well a year or so ago ran into a brick wall of financial disaster and they didn't have enough money to purchase all the crude oil they had been anticipating," he said. "That, consequently, resulted in a huge oversupply of crude oil that has depressed oil prices now for several months. That's why gasoline prices are so low (at the pump) and why oil companies are having to adjust their costs so dramatically." 
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Texaco
Amoco
Exxon
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