Occidental Petroleum Corp.'s (OXY) fourth-quarter earnings tumbled 79% as the energy producer recorded a $1.1 billion write-down of gas assets in the Midcontinent that offset higher oil production and cost-cutting.
Occidental, based in Los Angeles, boosted its oil and gas production in West Texas, California and the so-called Midcontinent region, where advances in drilling methods have helped unlock previously unreachable hydrocarbons. The growing production, combined with a still-tepid economy, has caused prices for oil and natural gas to fall, however.
Occidental said oil and gas output rose by 31,000 barrels a day, or 4%, to 779,000 barrels of oil equivalent a day. Even with the increase, Occidental also said its operations were more efficient, shaving production costs by $1.04 a barrel from the third quarter.
Revenue rose 2.3% to $6.17 billion.
Still, Occidental's capital expenditures budget continued to swell despite the company's promises to rein it in. The oil producer reported $2.5 billion in capital expenditures in the fourth quarter, essentially unchanged from the year before. Full year capex was $10.2 billion, 36% higher than 2011.
"Lone negative of the quarter appears to be stubbornly high capex," Simmons & Co. International analyst Bill Herbert said in a note to clients.
Occidental said it will spend $9.6 billion on capital expenditures in 2013, down nearly 6% from 2012. At the same time, the company plans to boost oil production by as much as 10%, Occidental Chief Executive Stephen Chazen said.
"We're trying to keep capital under control this year," Mr. Chazen said during a call with investors. "We're trying to be conservative and spend it only on the best things we can."
Lower oil and natural gas prices took a toll, however. Realized prices fell 3.4% for crude oil, while natural-gas liquids prices dropped 18%. Domestic-gas prices sank 14%.
Overall, Occidental reported a profit of $336 million, or 42 cents a share, down from $1.63 billion, or $2.01 a share, a year earlier. Excluding a $1.1 billion charge related to the impairment of gas assets in the Midcontinent, per-share earnings were $1.83.
Analysts polled by Thomson Reuters recently forecast earnings of $1.66 a share on revenue of $5.85 billion.
Investors cheered Los Angeles-based Occidental overall performance.
Copyright (c) 2012 Dow Jones & Company, Inc.
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