26-01-99 After the oil industry scored its most profitable year ever in 1997, its executives knew it would have a tough act to follow in 1998.
But a 40 % drop in crude oil prices and huge write-offs pushed three of the largest U.S. oil companies to big losses in the fourth quarter.

"The industry has not experienced crude oil prices this low since the mid-1970s," said Texaco Chairman and CEO Peter Bijur.
"I think you are starting to see the capitulation. Investors are starting to realise there is not going to be a turnaround any time soon," said an oil analyst.
Charges at Texaco were related not only to the fact that many oil fields, particularly small wells in the U.S., are not economic at oil prices below $ 13 a barrel, but also reflected $ 71 mm in currency losses on its Asian refining operations, the lower value of its refined product inventories and the costs of the start-up of its U.S. refining and marketing ventures with Shell and Saudi Refining.
For all of 1998, income before special items declined 50 % to $ 894 mm from $ 1.894 bn for 1997.
However, net special charges of $ 316 mm to cover the drop in the value of Texaco's oil fields and oil product inventories reduced 1998 net income to $ 578 mm -- down sharply from 1997's $ 2.664 bn after net special benefits of $ 770 mm.

Phillips Petroleum, as expected, failed to turn in a profit either at the net or operating level. On Jan. 6, Phillips had warned analysts and investors that it would record a fourth-quarter loss and cut about 1,400 jobs.
Now Phillips is basing its plans on $ 11- to $ 12-per-barrel oil, way below the $ 17- to $ 21-per-barrel average price of the 10 years preceding 1998.

At Occidental Petroleum, the earnings report was clouded by special items, plus the sale of its MidCon pipeline unit and the purchase of Union Texas Petroleum Holdings.
For the full year, Oxy's net income totalled $ 363 mm compared with a 1997 net loss of $ 390 mm.
Sales slid to $ 6.6 bn in 1998, down from $ 8.0 bn in 1997.
The losses forced Oxy to slash capital spending to just $ 350 mm from $ 1.06 bn.

Others, too, are hewing away at dead wood in an attempt to at least make some money with oil prices mired at below $ 13.

Texaco said it was adjusting to the new low-price paradigm with $ 600 mm in cuts from its capital spending program as well accelerating a layoff program.
"We are not standing still, waiting for prices to improve," Texaco's Chairman and CEO Bijur said. "We are implementing significant cost and expense reductions across all of our businesses."
BP Amoco said it would shed 1,600 jobs in Texas.
"Mobil remains focused on improving performance in this difficult environment," said Mobil chairman Lucio Noto. "Business fundamentals, as evidenced by the uncertain outlook for prices and margins in the near term, continue to be unpredictable."
For all of last year, profits dropped 48 % to $ 1.70 bn from $ 3.27 bn in 1997. Revenue declined 19 % to $ 53.57 bn from $ 65.91 bn.

For all of 1998, Unocal had earnings $ 130 mm, or 54 cents a share, compared with $ 581 mm, or $ 2.31 per share. Revenue fell to $ 5.48 bn from $ 6.06 bn.