Occidental Petroleum Corp. (OXY) announced fourth quarter 2010 operating earnings that grew 17% to $1.58 per share, versus $1.35 in the year-ago quarter. The result surpassed the Zacks Consensus Estimate of $1.53 by 5 cents.
For the full year 2010, Occidental’s earnings came in at $5.72 per share, beating the Zacks Consensus estimate of $5.62 and the year-ago result of $3.92.
Total Revenue
Occidental’s total operating revenue for the fourth quarter 2010 jumped 15.5% to $5.06 billion, versus $4.38 billion in the year-ago quarter. The actual results of the company were higher than the Zacks Consensus Estimate of $5.09 billion.
Revenue for the full year 2010 increased 28.6% to $19.04 billion from $14.81 billion in 2009. The company’s yearly revenue was also slightly above the Zacks Consensus estimate of $18.98 billion.
The increase in total revenue was attributable to higher revenue contribution from all three segments of the company, which included Oil and Gas, Chemical and Midstream, Marketing and Other. The results were marginally slashed by higher eliminations compared with the year-ago quarter.
Production, Sales and Realized Price
Occidental’s average daily production volumes were 753 thousand barrels of oil equivalents (MBOE) in the fourth quarter, versus 717 MBOE in the year-ago quarter, reflecting an increase of 5%. The increase in volume was mainly due to higher contribution from the company’s Middle East/North Africa operation, with a slight production growth experienced in the United States. For the full year, daily production volumes reached 699 MBOE, compared to 680 MBOE for full year 2009.
Occidental’s daily oil and gas sales volumes in the fourth quarter averaged 751 MBOE, compared with 722 MBOE in the same period last year. Daily sales volumes for the whole of 2010 were 744 MBOE, versus 714 MBOE in 2009.
The realized price for worldwide crude oil was $79.96 per barrel in the quarter, compared with $71.74 in the year-ago quarter. Domestic realized gas prices escalated $0.24 per thousand cubic feet (MCF) to $4.37 MCF in the fourth quarter from $4.13 per MCF in the prior-year quarter. Realized crude oil and gas prices for the full year were $75.16 per barrel (up 31%) and $3.46 per MCF (down 23.6%), respectively.
Segmental Earnings Results
Occidental’s total segmental earnings at the end of the fourth quarter and full year 2010 were $1.98 billion (down 0.2%) and $8.06 billion (up 40.9%), respectively.
Oil & Gas: Earnings from this segment for the fourth quarter were $1.9 billion, which was slightly higher than the year-ago quarter. For 2010, oil and gas earnings increased 45.5% year over year to $7.4 billion. The improvement in results was due to higher crude oil prices partially offset by higher operating costs and DD&A expenses.
Chemicals: Earnings from this segment during the quarter were $111 million, versus $33 million in the year-ago quarter, implying a whopping growth of 236.4%. The solid performance in the reported quarter was attributable to improved margins and volumes across all products. For the full year, segment earnings improved 12.6% to $438 million compared to $389 million in 2009.
Midstream, Marketing and Other: Earnings from this segment during the fourth quarter were $202 million, versus $81 million in the year-ago quarter, indicating an increase of 149.4%. The year-over-year improvement in results reflects higher margins in the trading and marketing businesses. Segment earnings for the year rose 100.9% to $472 million from $235 million in 2009.
Cash Flow and Capital Expenditure
Occidental continues to generate strong cash flow from operations. Cash generated from operations in 2010 was $9.3 billion, reflecting a 60% increase from 2009. Capital expenditure for Occidental was $799 million in the fourth quarter, bringing the full year 2010 spending to $3,153 million.
Our Take
We believe Occidental showed earnings momentum in the quarter driven by higher realized prices as well as volumes growth. Going forward, we believe the company will continue to benefit from rising oil prices, due to its oil-heavy production and reserve base.
Based in Los Angeles, California, Occidental Petroleum along with its subsidiaries operates as an oil and gas exploration and production company. Occidental has operations in the United States, Middle East/North Africa and Latin America. The company primarily competes with ConocoPhillips (COP) and Hess Corp. (HES).
Occidental Petroleum currently has a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term ‘Neutral’ rating on the stock.
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OCCIDENTAL PET (OXY): Free Stock Analysis Report
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