Bloomberg News

Chevron Quarterly Profit Misses Estimates as Output Falls

April 27, 2012

Chevron Corp. (CVX:US), the second-largest U.S. energy company, missed first-quarter profit and sales estimates as falling production blunted the impact of surging oil prices.

Excluding a gain from the sale of a Spanish fuels-marketing business, per-share profit was 11 cents less than the average of 16 analysts’ estimates compiled by Bloomberg. Net income rose 4.2 percent to $6.47 billion, or $3.27 a share, from $6.21 billion, or $3.09, a year earlier, the San Ramon, California- based company said in a statement today.

Chief Executive Officer John S. Watson has been contending with the downside of higher oil prices: a decline in output as some project contracts reduce the company’s share of production when global crude rises. The company said the higher price it receives for oil more than makes up for the decrease in its share.

Chevron gains $40 of earnings for every dollar lost to price effects, Jeanette Ourada, general manager of investor relations, said on a conference call with analysts today.

Natural-gas output also declined in the U.S. as the lowest prices in a decade discouraged drilling.

Gas Production Curtailments

“We are seeing the mothballing of some conventional natural-gas production at these low price levels,” said Robbert Van Batenburg, head of research at Louis Capital Markets LP in New York. “They can’t really fight that.”

Chevron pumped the equivalent of 2.63 million barrels of crude a day during the quarter, a 4.7 percent drop from 2.76 million produced a year earlier, according to the statement. Sales rose 0.8 percent to $58.9 billion, 7.8 percent less than the average of three analysts’ estimates compiled by Bloomberg.

Chevron fell (CVX:US) 2 cents to $106.20 at the close in New York. The shares have dropped 0.2 percent this year.

U.S. gas output dropped by 7.9 percent to 1.17 billion cubic feet a day. Crude production in the U.S. declined by 5.4 percent and fell by 6.3 percent internationally, the company said.

Brent crude futures, which serve as the benchmark for two- thirds of the world’s crude, jumped 12 percent to average $118.45 a barrel during the quarter. Every $1 increase in the price of oil reduces the company’s production volume by 1,000 barrels a day, Watson told analysts and investors in New York on March 13.

Neutral Effect

The earnings will have a neutral effect on Chevron’s stock, Barclay’s analyst Paul Cheng wrote in a note to clients. The market will focus on stronger-than-expected results in its exploration and production segment, Cheng wrote in the note, pointing to the company’s higher per-barrel profit.

Chevron saw profit equivalent to $25.80 per barrel, Cheng said, up from $24.10 in the year-earlier period and above Barclay’s estimate of $25.30. Cheng rates Chevron’s stock as overweight, which means investors should buy.

Chevron said on April 10 that it recorded a $200 million gain during the quarter from the sale of Spanish assets.

Exxon Mobil Corp. (XOM:US) reported $9.45 billion in first-quarter profit yesterday, an 11 percent decline from a year earlier. The Irving, Texas-based company is the largest U.S. energy producer by market value.

To contact the reporters on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net; Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • CVX
    (Chevron Corp)
    • $120.55 USD
    • -0.92
    • -0.76%
  • XOM
    (Exxon Mobil Corp)
    • $94.43 USD
    • -1.00
    • -1.06%
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