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Show Oil Companies Profits Decline Profits of the nation's 25 leading oil companies declined by $1.2 billion or 35 per cent during the second quarter of 1975 as compared with earnings for the same period a year earlier, according accord-ing to an analysis by the American Petroleum Institute. Insti-tute. THE 25 companies reported combined net earnings of more than $2.3 billion during the quarter just ended as opposed op-posed to $3.6 billion for the second quarter of 1974, the API said. Frank N. Ikard, president of API, noted that "critics who decried about the so-called so-called 'obscene profits' of 1973-74 have been strangely silent about the current turn of events." HE SAID that "the industry is obviously experiencing an ' erosion of its ability to generate and attract investment invest-ment capital during the most precarious energy situation the nation has ever faced. Surely, this bodes ill for the nation." Ikard pointed out that the industry's drop in earnings is even more pronounced when viewed on a six-months basis. NET EARNINGS for the companies declined from $7.0 billion during the first half of 1974 to $4.5 billion during the first six months of this year-a decrease of $2.5 billion or 36 per cent, he said. While the second quarter earnings are about eight per cent higher than net income for the first quarter of this year, they are still $1.3 billion or 35 per cent below the peak earnings of $3.6 billion reached during the third quarter of 1974, Ikard said. IKARD BLAMED the profits decline on the combined com-bined effects of the recession, inflation, government regulations regula-tions and higher taxes. The API president pointed out the industry's 'average rate of return - based on stockholder equity -- was 40 per cent lower in the first half of 1975 than in the comparable period a year ago. He reported report-ed that the average rate of return from January through June, 1975 was 11.9 per cent. "THAT IS far below the 15-20 15-20 per cent rate of return non-industry analysts such as the Chase Manhattan Bank have said the industry must have to finance the exploration explora-tion and expansion needed to make the United States independent of foreign energy sources," he said. Ikard said that for a further perspective on industry earnings, earn-ings, API analyzed second quarter reports for 1973, 1974, and 1975. The analysis revealed, Ikard said, that second quarter earnings in 1975 were 11 per cent higher than in 1973 an annual growth rate of only about 5 per cent. "BUT WHEN we take into account the rate of inflation as measured by the U.S. Bureau of Labor Statistics' Wholesale Price Index, we see that the companies' profits actually have declined in real terms about 16 per cent. This seriously constrains the investment in-vestment capabilities of the petroleum industry," he said. |