Texaco Reports Third Quarter Earnings Amidst Oil Price Fluctuations

Strategic Insights -

Texaco's Chairman and Chief Executive Officer Peter Bijur announced third quarter earnings of $215 million, a decline from the previous year's $490 million. The decrease was attributed to weak crude oil and natural gas prices, as well as depressed downstream margins in the Far East. However, Texaco's production growth and tight control over expenses helped mitigate these losses. Bijur highlighted the challenges of the third quarter, including low crude oil prices, economic instability in the Far East, and production disruptions caused by storms in the Gulf of Mexico.

Key Takeaways:

  • Texaco's total reported net income for the third quarter of 1998 was $215 million, a decline of 56% from the previous year.
  • The decrease was largely due to weak crude oil and natural gas prices, as well as depressed downstream margins in the Far East.
  • Texaco's worldwide production growth was nine percent for the quarter and 12 percent for nine months.
  • The company implemented a reorganization program at its affiliate Caltex to focus on functional organization and identify growth opportunities.
  • The program is expected to yield expense savings in excess of $50 million annually.
  • Texaco's U.S. alliances with Shell Oil Company and Saudi Refining, Inc. continue to implement programs that leverage existing synergies.
  • The Asian financial and economic crisis had a significant impact on Texaco's downstream results, particularly in Singapore, where refinery margins were negative.
  • Texaco's downstream results in the U.S. were down from an extremely strong quarter last year, but in Latin America and Europe, margins and sales volumes remained strong.

Statistics:

  • Texaco's total reported net income for the third quarter of 1998 was $215 million.
  • Net income for the third quarter of 1997 was $490 million.
  • For the first nine months of 1998, total reported net income was $816 million.
  • Net income for the first nine months of 1997 was $2,041 million.
  • Average quarterly crude oil prices slumped to their lowest levels since 1986.
  • Crude oil prices retreated from summer lows but remain significantly below last year's levels.
  • Worldwide daily production rose nine percent for the quarter and 12 percent for nine months.
  • Year-to-date cash operating expenses per barrel decreased six percent.

Sources:

  • Business Wire: "Texaco Reports Third Quarter Results October 21, 1998"
  • Original text: "Weak worldwide crude oil and natural gas prices and depressed downstream margins in the Far East eroded third quarter earnings"