Occidental Petroleum Corp.: A Record Year to Remember

High oil and gas prices boost profits to all-time highs.

You probably won't find Occidental Petroleum Corp. executives complaining too much about high oil prices. That's because the Los Angeles-based oil and gas producer ended 2007 with its highest-ever earnings. The IW 50 Best Manufacturer for 2007 rode the wave of escalating crude oil and natural gas prices to post record net income of $5.4 billion in 2007, or $6.44 per share. Profit rose from $4.2 billion, or $4.87 per share, in 2006.

Consumers may bemoan $100-per-barrel oil, but for Occidental and other oil companies high prices mean big profits.

"While high commodity prices clearly have boosted earnings throughout the industry, Oxy has consistently produced top-quartile results in capturing the value from higher prices on an equivalent barrel basis and delivering it to the bottom line," said Ray Irani, chairman and CEO in a Jan. 29 statement.

For the year-end quarter, Occidental posted net income of $1.45 billion, or $1.74 per share, compared with $930 million, or $1.09 per share, during fourth-quarter 2006.

Daily oil and gas production also were up in 2007, with Occidental averaging 570,000 barrels of oil per day compared with 545,000 barrels of oil per day in 2006.

The company also made several transactions in 2007 that should increase production. They include:

  • The purchase of Plains Exploration & Production Co.'s oil and gas properties in the Permian Basin in Texas and the Piceance Basin of Colorado. Together, these acquisitions are expected to increase Occidental's net proved reserves by 92 million barrels of oil per day.
  • New agreements with the Libya National Oil Corporation for major field redevelopment and exploration in the Sirte Basin. The five-year $5 billion project is expected to generate gross oil reserves of approximately 2.5 million barrels. As a result, oil production is projected to triple from the current 100,000 barrels per day to 300,000 barrels per day.
    Occidental Petroleum Corp.
    At A Glance

    Occidental Petroleum Corp.
    Los Angeles, Calif.
    Primary Industry: Petroleum & Coal Products
    Number of Employees: 9,700
    2006 In Review
    Revenue: $20 billion
    Profit Margin: 23.03%
    Sales Turnover: 0.56
    Inventory Turnover: 8.06
    Revenue Growth: 11.69%
    Return On Assets: 16.02%
    Return On Equity: 27.82%
  • The October purchase of the Anadarko Petroleum Corp.'s 92.5% interest in an exploration- and production-sharing agreement in offshore Qatar.
  • The acquisition of two offshore exploration blocks in Bahrain, where the company has launched a study phase and technical assessment.
  • Two asset exchanges with BP. Occidental purchased BP's West Texas pipeline system, which has the capacity to transport approximately 191,000 barrels of crude oil per day, and sold its non-core oil and gas interests in Pakistan to BP. Occidental also received additional Permian Basin oil and gas interests from BP in exchange for its one-third interest in the BP-operated Horn Mountain property in the Gulf of Mexico.
  • The January sale of its 50% equity investment in Russia for approximately $485 million, resulting in an after-tax gain of approximately $412 million.

Despite the record year, some industry analysts say oil companies are less optimistic than in previous years. Oil consumption is outpacing capacity, refining margins are down and exploration costs are increasing. Public backlash from rising fuel prices makes it more challenging for oil companies to pass on increases to consumers, according to an article in the International Herald Tribune.

Meanwhile, Occidental is doing its part to increase production with its March 10 announcement that it had entered into a joint-venture partnership with Abu Dhabi's International Petroleum Investment Co. The companies will work to develop upstream and downstream projects in the Middle East region.


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