Oil Companies’ Profits Rise
Oil companies are having the time of their life right now: ‘Record crude prices this summer are translating into huge profits, as BP and Occidental Petroleum showed Tuesday.’
Sadly for them, it may all come to an end: ‘But some energy companies are bracing for tougher times, keeping a closer tab on cash and cutting spending.
Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27. But prices have since tumbled more than 50 percent, and the global economic malaise has raised questions about energy demand at least into 2009.
Despite a 71 percent jump in third-quarter profit, Occidental Petroleum said Tuesday it likely would not increase capital spending next year from its current $4.7 billion level. Refiner Valero Energy Corp., which also reported July-September results Tuesday, said it was scaling back spending by 33 percent this year and cutting its 2009 budget.
“You can expect us to maintain our balanced approach by investing in growth projects, paying off debt, buying back stock and increasing dividends, but clearly we intend to hold much more cash than in the past,” said Valero chairman and chief executive Bill Klesse.
ConocoPhillips, the third-largest U.S. oil company, also has said it likely will keep capital spending at $15 billion next year.
Whatever you can say about oil companies, you cannot possibly call them risk-takers. If you want to invest your money in safe companies, invest in oil. The prices of oil will take a hit, probably, in the coming months, but they are likely to rise significantly in the years ahead. Buy oil stocks, keep them for a couple of years, and see your investments double or triple.
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