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Chemical Earnings Increase At Three Of Five Companies

by William J. Storck
February 26, 2007 | A version of this story appeared in Volume 85, Issue 9

Like the chemical companies that C&EN follows, the majority of the oil companies that also produce chemicals saw their fourth-quarter earnings increase over the same period in 2005. But with three improving and two declining, it was a small majority.

Taken together, the five firms reported chemical earnings totaling $1.64 billion, a 37.1% improvement over the 2005 period. The smallest chemical producer among the group, Sunoco, showed the largest percentage gain. Earnings at the firm doubled to $16 million.

"The chemicals business rebounded from the third quarter [when it earned $5 million] to earn $16 million in the fourth quarter, as lower average crude prices led to lower feedstock prices and expanded margins in both our polypropylene and phenol businesses," says John G. Drosdick, the firm's chief executive officer. For all of 2006, however, Sunoco's chemical earnings were down 54.3% to $43 million.

After Sunoco, Chevron followed with chemical earnings for the quarter up 74.6% to $124 million. Most of the increase, according to the company, came from improved operating margins on sales of lubricants and fuel additives by Chevron's Oronite subsidiary. Earnings were also higher for the company's 50% interest in Chevron Phillips Chemical. Full-year chemical earnings for Chevron also were up, by 80.9% to $539 million.

ConocoPhillips, Chevron's partner in Chevron Phillips, did not fare so well. Its fourth-quarter chemical earnings fell 14.0% to $98 million. The decrease, according to the company, was largely due to lower olefins and polyolefins margins. Its chemical earnings also included some one-time items. For the year, however, chemical earnings increased by 52.3% to $492 million, primarily due to higher olefins margins and volumes, lower utility costs, and a business interruption insurance benefit.

ExxonMobil, the largest of the five firms in terms of chemicals-and just about everything else-posted a chemical earnings increase of 48.7% to $1.24 billion, due to improved margins and higher volumes. For the full year, chemical earnings rose 28.8% to $4.38 billion.

Occidental Petroleum earned $156 million from chemicals in the fourth quarter, down 5.5% from the comparable 2005 quarter, mainly due to lower volumes. Chemical sales at Occidental, which is the only one of the oil companies to provide such data, decreased in the fourth quarter by 17.9% to $1.04 billion. Yet earnings in all of 2006 were up 16.0% to $901 million, due to higher margins in chlorine, caustic soda, and polyvinyl chloride.

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