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Big Oil Continues to Profit

Texaco Inc., Unocal Corp. and Amerada Hess Corp. yesterday reported second-quarter earnings ythat far surpassed Wall Street's estimates, but said softening prices may make this the last quarter of windfall profits.

Earlier this week the two largest U.S. oil companies, Exxon Mobil Corp. and Chevron Corp., reported higher second-quarter results, as the industry benefits from strong natural gas, crude oil and fuel prices, although Exxon's results fell short of consensus estimates.

"Texaco's earnings were outstanding, exceeding $800 million for the fourth consecutive quarter," said Glenn Tilton, chairman and chief executive.

Texaco, which operates approximately 5,000 convenience stores nationwide and is being acquired by Chevron, said second-quarter income rose to $817 million from $641 million in the same period last year.

Tilton said Texaco is looking to strengthen its exploration and production portfolio as weakening demand and increasing inventories have pushed down crude oil and natural gas prices from early in the quarter. He also said while refining profit margins have retreated from record highs reached early in the quarter, marketing profits have picked up from their earlier, low levels.

Unocal Corp., one of the top exploration and production companies, also reported higher-than-expected earnings on strong natural gas prices and higher production.

The El Segundo, Calif.-based company said after-tax quarter earnings from continuing operations jumped 15 percent to $228 million. "The higher operating earnings were driven principally by higher natural gas prices in the United States, compared with second quarter 2002, and continued increases in our worldwide natural gas and liquids production," said Charles Williamson, Unocal's CEO.

But Unocal says it is adjusting third quarter earnings estimates on assumptions of lower commodity prices. Unocal said third-quarter forecasted earnings would fall by 3 cents per share for every $1 change in average realized price of crude.

Amerada Hess, the Woodbridge, N.J.-based operator of approximately 800 convenience stores, said second-quarter earnings rose more than 75 percent on strong natural gas prices and higher profits from gasoline.

Hess said it earned $357 million, or $3.98 per share, in the quarter. In the second quarter last year, Hess posted earnings of $202 million, or $2.24 per share. The company said the average worldwide crude selling price in the second quarter was about $27 per barrel, up 12 percent from the year earlier quarter. Natural gas prices were up 38 percent to $4.64 per thousand cubic feet.

The increased refining, marketing and shipping results in the second quarter of 2001 reflect higher profit margins at its Port Reading, N.J., refinery as well as its HOVENSA refinery in the Virgin Islands, which it owns jointly with Petroleos de Venezuela. Hess' earnings from its refining and marketing unit rose over 50 percent to $101 million in the second quarter from the $64 million in the second quarter last year.
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