[IWAR] OIL weak prices

From: 7Pillars Partners (partnersat_private)
Date: Thu Jan 22 1998 - 20:10:21 PST

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    Weak Oil Prices to Keep Producers Under the Gun
    By David Chance 
    NEW YORK (Reuters) - A slide in crude oil prices to the lowest levels since
    1994 Thursday overshadowed fourth quarter
    earnings from the nation's top oil companies, and analysts said continued oil
    oversupply will keep their profits under the gun this
    As crude oil briefly dipped to $15.90 a barrel, the lowest level since April
    1994, some of the big oil companies issued strong
    earnings reports. Oil cut its loss and ended the day 32 cents lower at $16.04
    on the New York Mercantile Exchange. 
    Chevron Corp. said its quarterly profits doubled from a year ago, and Texaco
    Co. racked up solid earnings as higher oil
    production and strong marketing gains offset a slide in prices. "The fourth
    quarter is absolutely immaterial and the first quarter is
    going to be a disaster," said Michael Young, analyst at Deutsche Morgan
    Grenfell, who downgraded his 1998 earnings for the
    sector on the weaker oil outlook. 
    He said that what joy there was in the fourth quarter, which prompted some
    major producers to boast of record earnings, was
    the result of foreign currency gains. 
    "These earnings are completely fictitious as the companies have huge foreign
    currency gains," Young said. 
    Among the other producers that reported their results, Amoco Corp. said its
    income was lower, partly because of the Asian
    economic turmoil, while USX-Marathon Group said its quarterly earnings were cut
    by a charge for an inventory market
    Chevron said it earned $929 million, or $1.41 a share, up sharply from $464
    million, or 71 cents a share, a year ago, when the
    company took a charge of $221 million for its British operations. Revenues
    dropped to $9.7 billion from $11.2 billion. 
    The San Francisco-based company said crude oil prices in the fourth quarter
    were $4.00 lower than a year earlier at $17.68 a
    Despite the strong results, which beat analysts' estimates for earnings of only
    $1.00 a share, Chevron's stocks closed down
    $1.56 at $75.44 on the New York Stock Exchange. 
    Analysts cautioned that the results included a $143 million foreign exchange
    gain on its overseas refining and marketing
    operations which distorted results. 
    "If you exclude the currency gains, you start working back down to a number
    which is in line with forecasts," said Eugene
    Nowak, analyst at ABN-AMRO Chicago Corp. 
    For the year, Chevron earned $3.3 billion, or $5.05 a share, up sharply from
    $2.6 billion, or $3.99 a share in 1996. Revenues
    fell to $40.5 billion from $42.7 billion. 
    The company said its U.S. refining and marketing business had its best year
    since 1988, turning a $28 million loss into a $174
    million profit. 
    "In spite of lower crude oil prices, we reached our earnings goal of $3 billion
    one year ahead of schedule," said Chief Executive
    Officer Ken Derr. 
    "Our earnings improvement in 1997 was driven by the excellent performance of
    our U.S. refining and marketing operations and
    our continued focus on international liquids production growth," he said. 
    Derr said the strong earnings had prompted Chevron's board to approve a $6.3
    billion capital program for exploration and
    production for 1998, the largest in the company's history. 
    Texaco Inc. said its earnings jumped to $623 million, or $1.15 a share, from
    $509 million, or 95 cents, a year earlier. Before
    special items, earnings were up 24 percent to $472 million, or 87 cents a
    share, topping Wall Street's consensus estimate of 80
    cents. Sales totaled $12.0 billion, down from $12.8 billion. 
    But the White Plains, N.Y.-based company warned that the slide in world energy
    prices would hit earnings in early 1998. 
    Texaco said it overcame the sharp drop in world oil prices during the quarter
    by stepping up production and by squeezing more
    profits out of its refining and marketing divisions. 
    "The recent sharp decline in both oil and natural gas prices as well as
    stagnant refining margins will apply downward pressure
    on first-quarter 1998 earnings," said Texaco Chief Executive Peter Bijur. 
    For the full year, Texaco's earnings rose to $2.7 billion, or $4.99 a share,
    including special items, from $2.0 billion, or $3.77, in
    1996. Before the items, earnings rose to $1.9 billion, or $3.52 a share, from
    $1.7 billion or $3.09. Sales rose to $46.6 billion
    from $45.5 billion a year earlier. 
    Texaco stock fell $1.125 to $52.875 on the NYSE. 
    Amoco Corp. said its fourth-quarter income fell to $789 million, or $1.63 per
    share from $871 million, or $1.74 per share, a
    year ago. 
    The company had revenues of $9.69 billion, down from revenues for the same
    period a year ago of $10.11 billion. 
    For the year, Amoco earned $2.72 billion on revenues of $36.29 billion,
    compared with record 1996 earnings of $2.83 billion
    on revenues of $36.11 billion. 
    "Despite this current environment ... we are continuing to take the steps
    necessary to meet our targets set last year of 10
    percent average annual growth rate in earnings and a 15 percent return on
    capital employed by 2001," said Laurance Fuller,
    chairman of the Chicago-based company. 
    Amoco's stock fell $2.44 to $80.125 on the NYSE. 
    USX-Marathon Group, the oil and gas unit of USX Corp., said a charge for an
    inventory market valuation cut its fourth quarter
    earnings to $38 million, or 14 cents a share, from $160 million, or 57 cents a
    share, a year earlier. Sales dropped to $3.8 billion
    from $4.4 billion. 
    For all of 1997, the Marathon Group earned $456 million, or $1.59 per share,
    down from year-earlier profits of $664 million,
    or $2.31 per share. Sales fell to $15.6 billion from $16.2 billion. 
    The Pittsburgh-based company said earnings from international exploration and
    production also fell, to $45 million in the
    quarter from $116 million a year earlier. 
    Marathon's stock fell $1.94 to $31.94 on the NYSE.

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