(Reuters) - Occidental Petroleum Corp on Tuesday reported a quarterly profit that beat analysts’ estimates, but forecast lower pre-tax income sequentially for its midstream and marketing unit, sending its shares down 1.9 percent after the bell.
Production from its Permian resources unit rose 57 percent to 250,000 barrels of oil equivalent per day (boe/d) in the fourth quarter, boosted by investments in the basin, while adjusted pre-tax income from the midstream unit rose to $670 million from $129 million, a year earlier.
The midstream segment’s performance was driven by wide differentials between Midland and Gulf Coast crude prices, Raymond James analyst Muhammed Ghulam said.
For the first quarter of 2019, the company forecast pre-tax income of $150 million to $200 million from the unit.
A surge in Permian production had led to trapped barrels in the oilfield, resulting in Midland crude trading at wide discounts to U.S. Gulf Coast prices.
Occidental’s midstream unit, which has benefited from selling discounted Midland crude at higher prices, will likely see lower earnings going forward as the differentials narrow with more pipeline access in the Permian.
A recovery in global oil prices since the end of 2016 led to a resurgence in U.S. shale activity centered around the Permian basin of Texas and New Mexico. The United States recently edged past Saudi Arabia and Russia to become the world’s top oil producer.
Occidental said it expects a more than 30 percent growth in Permian Resources in 2019.
Occidental’s average production was up about 13 percent at 700,000 barrels of oil equivalent per day (boe/d).
Although U.S. crude prices fell over 35 percent in the three months ended Dec. 31, they were 7 percent higher on average in the fourth quarter, compared with a year earlier.
The company’s adjusted profit rose to $922 million, or $1.22 per share, in the fourth quarter ended Dec. 31 from $313 million, or 41 cents per share, a year earlier.
Analysts on average had estimated the company to post a profit of $1.14 per share, according to IBES data from Refinitiv.
Occidental recorded impairment charges on its Qatar assets of $220 million.
Reporting by Debroop Roy in Bengaluru; Editing by Anil D'Silva and Lisa Shumaker