Recession Holds Down Oil Earnings – US-FOREX.US
The energy sector will get a look at two sides of the industry on Thursday when both Occidental Petroleum, an exploration and production oil and gas company, and Diamond Offshore Drilling, a drilling contractor, report second-quarter earnings.
Occidental Petroleum
is extremely well-positioned with its low exposure to the U.S. gas market, stable domestic production and growth opportunities in the Middle East, according to Barclays Capital analyst Thomas Driscoll. “Considering the run-up in oil prices last quarter and falling service costs [moving in sympathy with natural gas prices], we expect Occidental to enjoy more significant margin expansion when compared to peers,” he said.In April, the international E&P company Occidental Petroleum reported oil and gas production growth of nearly 8% year-over-year, despite realized prices of global crude oil that were nearly 55% lower than in 2008′s first quarter, and gas prices that were roughly 57% lower year-over-year. When the Los Angeles company reports second-quarter earnings on Thursday, analysts will be expecting a profit of 79 cents a share on sales of 3.8 billion, according to Thomson Reuters. Investors will pay particular attention to the company’s margins since realized crude prices are anticipated to be 35% stronger than the prior quarter, according to Driscoll. With the second-largest deepwater rig fleet in the world after Transocean
, Diamond Offshore Drilling
should benefit once exploration and production companies are able to increase their spending, but the timing of such a turnaround remains uncertain. According to a recent Barclays Capital E&P spending survey, E&P companies’ budgets are expected to decline by 15% in 2009. Any comments offered by management regarding the company’s outlook will be welcomed by the market, which has been anticipating second-quarter earnings of 2.63 a share and sales of 942.5 million.
Both companies’ shares traded lower ahead of Wednesday’s market close. Occidental’s stock lost 54 cents, or 0.8%, at 69.68, while Diamond shares were down by 95 cents, or 1.1%, at 87.58.