Occidental Petroleum Corporation’s (OXY) first quarter 2011 operating earnings jumped 45.2% to $1.96 per share, versus $1.35 in the year-ago quarter. The result surpassed the Zacks Consensus Estimate of $1.80 by 16 cents driven by higher oil price realizations and increased production in the Middle East.
Total Revenue
Occidental’s quarterly revenue increased 24% to $5.73 billion compared with $4.62 billion in the year-ago quarter. The actual results of the company were also higher than the Zacks Consensus Estimate of $5.44 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 730 thousand barrels of oil equivalents (MBOE) in the first quarter, up 4% from the year-ago quarter. The increase in volume was mainly due to higher oil volumes produced at the company’s Middle East/North Africa region, together with higher domestic natural gas and NGL production. Occidental’s daily oil and gas sales volumes in the quarter increased 6.3% year over year to 728 MBOE.
In the first quarter, Occidental’s overall realized price for crude oil increased 24.4% from the prior year period to $92.14 per barrel, while the realized NGL prices rose 10.9% to $52.64 per barrel. Domestic realized gas prices dipped $1.41 per thousand cubic feet (MCF) from last year to $4.21 MCF in the first quarter.
Segmental Earnings Results
Occidental’s total segmental earnings at the end of the first quarter were $2.8 billion, up 40% from the first quarter of 2010.
Oil & Gas: Earnings from this segment for the first quarter were $2.5 billion, up 31.6% from the year-ago quarter. The improvement in results was due to higher crude oil prices and higher sales volumes in the Middle East, partially offset by higher operating costs and DD&A rates.
Chemicals: Chemicals earnings in the quarter rose substantially from $30 million in the first quarter of 2010 to $219 million. The solid performance in the reported quarter was attributable to strong export sales and higher margins resulting from improved supply-demand balances across most products, including calcium chloride and lower energy costs.
Midstream, Marketing and Other: Segment earnings during the first quarter were $114 million, up $20 million from the year-ago quarter, reflecting increased income from the pipeline business, higher margins in the marketing and trading business, partially offset by lower margins in the gas processing business.
Cash Flow and Capital Expenditure
Occidental continues to generate strong cash flow from operations of $2.2 billion, flat year over year. Capital expenditure for Occidental was $1.3 billion in the first quarter, compared with $768 million in the year-ago quarter.
Total long-term debt at the end of the first quarter was $4.75 billion compared with $5.11 billion at year-end 2010. The company’s total debt-to-capitalization ratio at quarter-end was 12% versus 14% at year-end 2010.
Our Take
Occidental showed improvement in earnings driven by higher realized prices as well as volumes growth in the Middle East. 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’s primary competitor Exxon Mobil Corp. (XOM) also released its first quarter 2011 results today. The company’s first quarter earnings shot up more than 69% year over year driven by higher commodity price realizations, improved refinery margins and solid chemical contributions.
The world’s largest publicly traded oil company posted earnings of $2.14 per share, beating the Zacks Consensus Estimate of $2.05 and were substantially ahead of the year-earlier earnings of $1.33.
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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