Explaining Southern California's economy

Occidental Petroleum sees fourth quarter profits plunge

TO GO WITH AFP STORY: Commodities-oil-en

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Occidental Petroleum produced plenty of oil and gas in the fourth quarter of 2012, but heavy investments in the future of business and giving investors pause.

Occidental Petroleum, still based in Los Angeles, is still the biggest domestic player in the oil and gas business. But look out below! The company posted a massive drop in profits for the fourth quarter of 2012. 

As in really massive, down to $336 million from $1.6 billion in 2011 — nearly an 80 percent year-over-year plunge.

The decline was much bigger than Occidental’s third quarter slide of 20 percent. Some of the same problems are to blame: the cost of managing wells in California and heavy spending to improve the business.

Wall Street shrugged off the loss and pushed Oxy’s stock price higher in trading Thursday. And for what it's worth, Occidental set records for oil production in the quarter, continuing a trend.

But rumblings continue about whether the company should break apart its different businesses — and whether CEO Stephen Chazen, who took charge in 2011, is the right man for the job.


Domestic oil boom: Occidental could buy Yates Petroleum for $3 billion

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Occidental Petroleum could be a buyer for Yates Petroleum, a family owned oil company that owns fields in New Mexico.

Los-Angeles based Occidental Petroleum is looking for more growth. It's coming off a weaker 2012 third quarter than the prior year, with profits down over 20 percent, and has a new CEO, Stephen Chazen, who wants to prevent a further slide. But rather than do as some analysts have suggested and buy back stock — a reliable way to boost a flagging share price — Chazen could be going shopping. And Yates Petroleum, a family-owned company, could be the prize.

Things are rough in the oil business right now, with refineries catching fire in California and superstorms ravaging the supply infrastructure in the Northeast. In this context, Occidental's third quarter slide is understandable. But the word on the street is that Chazen wants to move the needle on the company's stock price, which is well off its high of $115, achieved in 2011. 


Unlucky ($4.)13 for gas prices in Los Angeles?

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People stand near downed branches as Tropical Storm Isaac begins to move ashore. The storm is creating havoc in the heart of the U.S. refining business, adding additional pressure to force prices up.

That's about the size of it. According to GasBuddy.com, the average price of a gallon of regular is holding steady at just about $4.13 today, a week ahead of Labor Day. 

This is about 2 cents higher than a week ago and confirmation that the fire at Chevron's Richmind refinery in the Bay Area a few weeks back has taken enough capacity offline to ensure that L.A. prices will remain above $4 a gallon.

But there are other problems in the world of gas refining and oil drilling. A fire hit a huge refinery in Venezuela over the weekend, and tropical storm Isaac is currently cutting a swath through the heart of the U.S. refining industry, the Gulf of Mexico. Numerous oil and gas suppliers and refiners have shut down their operations until the storm blows over.

All of this will push gas prices up nationally. They're risen about 25 cents since this time last month. But they haven't hit $4 yet. Los Angeles crossed that threshold a while ago because California law requires that our drivers burn a cleaner blend — one that isn't produced in significant volume outside the state.


Q&A: Chevron Richmond refinery fire and higher gas prices in SoCal

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Corey Bridwell/KPCC

Gas prices at a Chevron station in Pasadena. In Southern California, in the aftermath of Chevron's Richmond fire, prices could climb this high or higher in coming weeks.

The fire that broke out at Chevron's Richmond refinery last night is now under control, but the impact on gas prices in the California is just beginning. Even though the damage was done in the Bay Area, Southern California is likely to feel the impact. Here's a Q&A to explain the situation.

Q: How expensive is gas going to get in SoCal?

A: Analysts who follow the oil-and-gas markets have been reported predicting a spike of 25-40 cents this week, in a California market that's already paying a lot more for its gasoline than the rest of the country: $3.86 per gallon versus $3.63 for the rest of the U.S., according to AAA (via CNBC). Los Angeles drivers are paying even more than that: $3.93 per gallon. That's a ways off from the $5 per gallon peaks that we hit during the summer of 2008. But it still isn't pretty.