In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Strong oil and gas prices and improved chemical margins were key drivers in the 74 percent increase in net income compared to our performance a year ago, resulting in the highest quarterly income in the company's history."
Oil and Gas
Oil and gas segment earnings were a record $1.3 billion for the first quarter 2005, which was 47 percent higher than the $915 million in earnings for the first quarter 2004. The first quarter 2005 earnings reflected a $529 million improvement from the impact of higher energy prices, partially offset by higher operating expenses and increased DD&A rates.
For the quarter, oil and gas production averaged 565,000 barrels of oil equivalent, which was essentially flat with the 568,000 equivalent barrels per day produced in the first quarter 2004, and up slightly compared to the fourth quarter 2004 rate of 558,000 equivalent barrels per day. Compared to a year ago, production under the company's production sharing contracts in Oman, Qatar, Yemen and Long Beach was negatively impacted by higher prices. The average price for West Texas Intermediate crude oil in the first quarter 2005 was $49.84 per barrel compared to $35.15 per barrel in the first quarter 2004. If prices had remained at first quarter 2004 levels, production in the first quarter 2005 would have been more than 13,000 equivalent barrels per day higher.
Earlier this year, Occidental's executive management said that it expected to exit 2005 with a production level of approximately 600,000 equivalent barrels per day. That expectation is unchanged.
At the end of the first quarter, Occidental completed two acquisitions in the Permian Basin. These acquisitions are expected to contribute 10,000 equivalent barrels per day to the 2005 production exit rate and keep the company on track in meeting its year-end production target.
Chemical segment earnings were $214 million for the first quarter 2005, nearly four times higher than the $56 million earned in the first quarter 2004. The improvement was due to higher margins in all major products resulting from higher sales prices, partially offset by higher energy and feedstock costs.
During the first quarter, $450 million of 7.65 percent senior notes were redeemed with a related charge of $10 million to interest expense. At March 31, Occidental's debt was $3.5 billion compared to $3.9 billion at the end of 2004. After taking into account the $450 million in debt retirement costs and $300 million in acquisition costs, the company had cash and short-term investments of $1.4 billion at the end of the quarter, which was approximately the same level as the end of 2004. Stockholders' equity was $11.2 billion, up by nearly $700 million compared to year-end 2004.
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