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. Last Updated: 07/27/2016

Oil Firms' Earnings Rise, But Stocks Fall




LOS ANGELES -- The United States' largest oil companies reported sharply higher earnings Monday for the third quarter, thanks to an oil price gusher that boosted profits from exploration and production while shrinking income from gasoline and other competitive refined products.


Atlantic Richfield, Chevron and Exxon beat stock analysts' earnings estimates, while Mobil and Texaco, although falling short of expectations, still posted earnings well above year-ago levels. Crude prices and oil company profits are expected to hold their own or improve slightly through the end of the year, analysts said.


But most oil stocks plunged Monday, reflecting continuing uncertainty about the direction of oil prices and whether the Organization of Petroleum Exporting Countries will keep its pledge to reduce production through March.


"This was the best quarter in two years and still there were no takers,'' said Fadel Gheit, senior energy analyst at Fahnestock & Co., a New York investment firm. "It's unfortunate but people are very jittery about the market.''


The companies all cited higher prices for crude oil and natural gas as the source of their renewed good fortune after one of the worst years in recent memory. Oil prices fell dramatically in 1998, hitting a 12-year low in December of near $10 a barrel.


Prices began to rise in March when OPEC agreed to slice output, passing a psychological barrier of $25 a barrel late last month before falling back. Crude oil for December delivery slipped 10 cents Monday to $23.35 a barrel on the New York Mercantile Exchange.


Cost-cutting programs instituted across the industry also helped earnings, company executives said.


"Stronger commodity prices made the headlines this quarter,'' said Mike Bowlin, chairman and chief executive of Los Angeles-based Arco, which is merging with BP Amoco. "However, our third-quarter results also demonstrate the strong benefits being realized from our accelerated cost-reduction program.''


Arco, the seventh largest U.S. oil company in assets, posted a 600 percent increase in earnings before special items to $511 million, or $1.55 per diluted share, from $73 million, or 22 cents a share, in the third quarter of 1998. Analysts on average had predicted earnings of $1.23 a share, according to a survey by First Call/Thomson Financial.


San Francisco-based Chevron Corp., No. 3 in assets, saw operating earnings jump 82 percent to $702 million, or $1.07 a share, beating analyst estimates by 6 cents. Net income rose 26 percent to $461 million.


Exxon of Irving, Texas, the nation's largest oil company, posted a 7.1 percent earnings gain to $1.5 billion, or 61 cents a share. Mobil Corp.'s earnings rose 42 percent to $705 million, or 87 cents a share, and Texaco Inc. more than doubled its operating income to $453 million, or 83 cents a share.


Oil company stocks, which have enjoyed a healthy run-up so far this year, slumped Monday on the New York Stock Exchange. Exxon's shares fell $2.88 to close at $74 a share, Mobil dropped $4.94 to $97.06, Texaco slipped $1 to $61.88, Chevron lost $3.75 to $90 and Arco gave up $3.13 to $90.88.