Occidental Petroleum pumps out another profit despite slumping prices of oil, gas.

Occidental Petroleum pumps out another profit despite slumping prices of oil, gas

Occidental Petroleum Corp.'s report of first quarter net income of $108 million (37 cents a share), compared with net income of $67 million (24 cents a share) in 1989, may have raised the eyebrows of analysts who specialize in the chemical industry. But analysts who regularly track the Los Angeles-based chemical and gas giant were not fazed by the 61 percent, $41 million increase that Occidental posted for the first three months of 1990.

"You can never predict Occidental," said James L. Bellessa Jr., director of research for Great Falls, Mont.-based D.A. Davidson & Co. "They always find ways to make things happen, selling companies or utilizing other non-recurring assets, to produce profits even during slumps in the chemical industry and the oil industry."

This time around, Occidental reported a $36 million pretax gain from the settlement of a claim against Venezuela during the country's 1975 nationalization, a $16 million reversal of income-tax reserves from a 1985 Internal Revenue Service audit and a $13 million pretax write-off of receivables.

Linked with the burgeoning profits in oil and natural gas transmissions, the non-recurring income was enough to produce profits at Occidental, Bellessa said.

Natural gas and oil earnings rose to $100 million in the quarter, from $35 million a year ago. The increased natural gas and oil earnings were a result of increased crude prices and increased natural gas prices, as well as reduced operating expense in the domestic divisions, the company said.

"Occidental really is a company designed to profit from higher oil and gas prices," said Bellessa. "In recent years, with depressed oil and gas prices, they've suffered in these divisions. This could be the beginning of a turnaround in those areas, though it is too soon to tell."

Oil and gas and natural gas transmission divisions clearly carried the quarter for Occidental, offsetting a dramatic, $96 million drop in Occidental's chemical operations.

The chemical operations, a wing headed-by-chairman-to-be Ray Irani, had contributed as much as 76 percent of Occidental's operating income in previous quarters. But earnings were sluggish in the first quarter of 1990, falling to $186 million from $282 million one year ago.

Occidental's lowered profits in chemical operations reflected a depressed petro-chemical, polymer and plastics industry, both the company and analysts said.

Occidental's increased fortunes, in the face of an industry-wide chemical slump, were no more unusual than the myriad activities Occidental has engaged in since Armand Hammer, 91 and its only chairman, was a spring chicken.

After all, said one analyst, this is the company that bought a Nebraska-based meatpacker, IBP Inc., in 1982 and promptly sold 49 percent to the public for $960 million. It is currently considering selling the rest of the IPB subsidiary, the analyst speculated. A company spokesman said that he had not heard anything about IBP Inc. recently.

IBP's earnings rose to $14 million in the first quarter 1990, up from $13 million a year ago.

"The overall earnings at Occidental are a little surprising, but nothing extraordinary for Occidental," said Craig Schwerdt, an analyst with Los Angeles-based Seidler Amdec Securities Inc.

Sales rose 2 percent during Occidental's 1990 first quarter 1990, to $5.2 billion, from $5.1 billion in 1989. A company spokesman said that Occidental would again pay its $2.70 dividend, "as it has for some years now." Net income has not covered Occidental's dividend since 1984.

"Remember, we're talking about first quarter earnings only," said Alvin Silber, an analyst with New York-based Brean Murray Foster Securities Inc, of the 61 percent hike in profits. "But Occidental's diversification into energy has paid off so far in 1990. It will be interesting to see if Occidental can do well in the second and third quarters, when the natural gas, gas and oil transmission revenues will likely drop."

Table : Occidental Petroleum Corp.'s after-tax operating income (in millions)

                   First         First
                  quarter       quarter
                ended March   ended March
                 30, 1990      30, 1989
Oil and gas          $100           $35
Natural gas            94            61

transmission

Chemicals             186           282
Agribusiness           14            13
Coal                    4             3