Newspaper article THE JOURNAL RECORD

American Oil Firms Expected to See Drop in Earnings

Newspaper article THE JOURNAL RECORD

American Oil Firms Expected to See Drop in Earnings

Article excerpt


By Thomas C. Hayes DALLAS - Big international oil companies, including Exxon, Mobil and Royal Dutch/Shell, are expected to report a surge in first-quarter profits next week, but analysts say others that operate mainly in North America are likely to be less fortunate. ARCO and Unocal, among others, will probably post modest declines, they said.

Unlike the last three months of 1990, when war fears pushed crude prices up to an average near $30 a barrel and oil production units posted big earnings gains, profits in the exploration and production sector will probably be little changed for the first quarter frkm a year earlier.

Oil producers received about $21 a barrel for their crude oil in the quarter, about the same as a year earlier.

But the Persian Gulf war's indirect impact on the global oil giants was potent because of the huge orders that Saudi officials placed with refiners to stockpile jet fuel, gasoline and other critical petroleum products before and during the war against Iraq, analysts said.

They project that overall profit gains for the big international companies will average more than 40 percent, mainly because their refining and marketing units in Europe, Singapore and Asia reaped a bonanza from military purchases.

Weather was also a factor, with colder temperatures gripping Europe, in contrast to a remarkably mild winter in most of the United States.

The weather added to a run-up in natural gas prices that was already under way in Europe. Natural gas demand and prices plunged in the United States because of the warmer weather.

Market values for global oil companies have increased nearly as much as the Standard & Poor's industrial index, which has risen 20 percent this year.

From Jan. 1 through Wednesday, Exxon was up by 16 percent, Mobil by 17 percent and Texaco by 14 percent on the Big Board.

Meanwhile, the stocks of ARCO and Unocal, both domestic refiners, were up 7 percent apiece.

Fareed Mohamedi, senior economist at Petroleum Finance Co., a Washington consulting firm, said the Saudis had accumulated at least 300,000 barrels of jet fuel for an air campaign projected to last three months against Iraq and gasoline supplies to keep tanks and other vehicles operating for a month-long ground war.

Saudi orders pushed the profit margins for the big oil companies' refineries in Singapore above $20 for the equivalent of a barrel of gasoline, jet fuel and other petroleum products, compared with margins of about $2 a barrel before the gulf crisis erupted last August. …

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