Occidental Petroleum Corp. (Oxy), an international oil and gas exploration and production company as well as a major North American chemical manufacturer, announced in late July that it made a significant discovery of oil and gas reserves in Kern County, California. The timing couldn't have been better for the Dallas-based company, which recently announced less-than-stellar financial results.
According to a company press release, Oxy posted net income (the sum remaining after all expenses are met) of $682 million for the second quarter of 2009, compared with $2.3 billion for the second quarter of 2008. Oil and gas segment earnings were $1.1 billion for the second quarter of 2009, compared with $3.8 billion for the same period in 2008. The decrease in the second quarter 2009 segment earnings reflected lower crude oil and natural gas prices.
The company's chemical segment earnings for the second quarter 2009 were $115 million, compared with $144 million for the same period in 2008. The second quarter of 2009 results reflect the continued weakness in the U.S. housing, automotive and durable goods sectors, resulting in lower volumes for chlorine, caustic soda and polyvinyl chloride. The lower volumes were partially offset by lower feedstock and energy costs.
Accentuating the positive, Ray R. Irani, chairman and CEO, said, "Occidental achieved year-over-year production growth of 10% in the second quarter and nearly 9% in the six months of 2009. Our discovery in Kern County, California, . . . should also contribute to our future growth."[sidebar id="1"]
Occidental believes there are between 150 million and 250 million gross barrels of oil equivalent (BOE) reserves within the area where Oxy has drilled six wells to date to delineate the discovery. The bulk of the discovery's producing zones are conventional oil-and-gas bearing formations.
Occidental's interest in the discovery area is approximately 80%. Approximately two-thirds of the discovery is believed to be natural gas.
"We believe this to be the largest new oil and gas discovery made in California in more than 35 years," says Irani. "It is probable that there are additional reserves outside the defined area, and it is possible that structures of this type exist elsewhere in Oxy's 1.1 million net acre position in California. We plan to drill wells to exploit these opportunities over the next five to 10 years."
In other news, the company announced that former U.S. Secretary of Commerce Carlos M. Gutierrez has been elected to its Board of Directors. Prior to his government service, Secretary Gutierrez was chairman and CEO of Kellogg Co. His election brings the Oxy Board to 13 members, 12 of whom are independent outside directors.