Chemical Operations Had Mixed Results

Oil Companies

Most of the headlines concerning earnings at U.S. oil companies in the fourth quarter stressed the large growth in their bottom line, and there was some reason for this. Industry leader ExxonMobil saw its total earnings jump 22.6% over the year-earlier quarter to $10.3 billion. This is a bigger number than the quarterly sales for all but one of the chemical companies in C&EN's sample.

Occidental Petroleum's total earnings were up 55.3% to $1.15 billion, Chevron's were up 20.5% to $4.14 billion, ConocoPhillips' increased 52.5% to $3.78 billion, and Sunoco's rose 66.8% to $287.0 million. But these companies saw much lower growth, if not declines, in their chemical operations. The reasons were much the same as they were for the chemical companies.

Earnings from ExxonMobil's chemical business declined 32.9% in the fourth quarter to $835.0 million, according to the company, as a result of increased feedstock costs. And sales volumes were down 6.6% from last year's fourth quarter to 6.3 million metric tons.

Sunoco, the smallest of the five oil companies surveyed and the one with the smallest chemical operations, had an earnings decline of 80.0% to just $8.0 million. Margins and volumes for polypropylene and phenol, two of the company's major chemical products, declined; average margins were down 2.3 cents per lb, and total sales volumes were 9% below the 2004 fourth quarter. Higher expenses, in part due to natural gas prices, also contributed to the decline.

Chevron's chemical operations earned $71.0 million in the quarter, down 5.3% from the comparable 2004 period. Its earnings from Chevron Phillips Chemical, the joint venture it owns with ConocoPhillips, fell as a result of income tax adjustments that more than offset improved margins for its commodity chemicals.

Partner ConocoPhillips, on the other hand, reported earnings from continuing chemical operations of $114.0 million, a 37.3% increase over the 2004 period. The increase came from higher margins, particularly for olefins and polyolefins, as well as recovery from the impacts of the hurricanes.

And finally, Occidental Petroleum's chemical earnings were up 36.8% to $171.0 million, thanks to contributions from the chlor-alkali operations acquired from Vulcan Industries and higher margins in chlorine, caustic soda, and polyvinyl chloride as a result of higher selling prices, partially offset by higher raw material costs.

For the full year, Chevron's chemical earnings were down 5.1% to $298.0 million and ExxonMobil's were off 0.7% to $3.40 billion. Sunoco's full-year chemical earnings were unchanged at $94.0 million, while ConocoPhillips' were up 29.7% to $323.0 million, and Oxy's chemical earnings rose 24.5% to $777.0 million.