Oil-Firm Earnings Expected to Rise from Venezuela Strike

sg.biz.yahoo.com Monday January 27, 4:02 PM

The top 10 oil companies operating in Venezuela are losing nearly $7 million a day because of a sharp decline in Venezuelan oil production. For most of them, that's a small price for what is proving to be a financial bonanza, Monday's Wall Street Journal reported.

Venezuela's prolonged strike has helped push oil prices to more than $30 a barrel and resulted in production increases for several member nations of the Organization of Petroleum Exporting Countries, where many of the same companies operate. Since the amount of oil major companies produce in Venezuela is a tiny fraction of their overall production, they are benefiting along with virtually every other oil producer in the world. One exception: Petroleos de Venezuela SA, Venezuela's national oil company.

"Oil companies are crying all the way to the bank," said Fadel Gheit, an analyst at Fahnestock & Co.

Earnings among major oil companies for the fourth quarter of 2002, to be released this week, are expected to be 51% higher than a year earlier, in part because of Venezuela's turmoil, according to Bruce Lanni, an analyst at A.G. Edwards Inc. Exploration and production profit at ChevronTexaco Corp., whose 120,000-barrel-a-day production in Venezuela has been roughly halved, are expected to triple, Mr. Lanni said. The reason: robust prices in addition to merger savings.

"We had to shut all of our production," said an official at BP PLC, which produces almost 50,000 barrels a day in Venezuela. "But the financial loss was more than offset by the rise in the world price of oil."

Oil prices have risen more than 20% since the Dec. 2 start of a strike aimed at forcing Venezuelan President Hugo Chavez from office. Industry analysts attribute some of the rise in price to growing concern about a possible war with Iraq, another major oil producer, and cold weather. But they say the primary driver has been Venezuela, adding as much as $6 a barrel to the price of oil.

On Friday the U.S. benchmark settled $1.03 higher at $33.28 a barrel on the New York Mercantile Exchange. European Brent rose 77 cents, closing at $30.49 on the London Petroleum Exchange.

Wall Street Journal Staff Reporters Bhushan Bahree and Thaddeus Herrick contributed to this report.