Bloomberg News

Chevron Profit Tumbles as Oil Output Falls, Prices Tank

November 02, 2012

Chevron Net Income Tumbles as Oil Production Falls, Prices Tank

A man works on a Chevron Corp. sign at a gasoline station in San Francisco, California. Photographer: David Paul Morris/Bloomberg

Chevron Corp. (CVX:US), the second-biggest U.S. energy company by market value, said third-quarter profit declined as output plunged to a 4-year low, oil prices slumped and refining income dropped 65 percent.

Net income was $5.25 billion, or $2.69 a share, compared with $7.83 billion, or $3.92, a year earlier, San Ramon, California-based Chevron said in a statement today. Per-share results were 15 cents less than the $2.84 average of 19 analysts’ estimates compiled by Bloomberg.

Oil and natural gas production (CVX:US) from Chevron’s wells dropped to the lowest since the third quarter of 2008 after Hurricane Isaac shut output in the Gulf of Mexico and oilfield repairs were conducted in Kazakhstan and the U.K. Isaac also forced the shutdown of Chevron’s largest refinery in Pascagoula, Mississippi, and a fire damaged the company’s San Francisco-area plant.

Chevron’s fuel-production profit fell by $1.3 billion to $689 million because of the plant outages and declining fuel margins. The U.S. margin for processing oil into gasoline and diesel fell 5.2 percent to an average of $30.86 per barrel during the quarter, based on benchmark futures contracts traded in New York.

Chairman and Chief Executive Officer John Watson is spending almost $90 million a day this year to expand the search for untapped reserves from the Indian Ocean to the Baltic Sea. The company is aiming to raise production by one-fifth by the end of 2017 to the equivalent of 3.3 million barrels of crude.

Energy Prices

The earnings statement was released before the opening of regular U.S. stock trading. Chevron rose 1.1 percent yesterday to $111.46 at the close in New York. Sales fell 9.9 percent to $58.04 billion.

Profit from oil and gas wells declined by 17 percent to $5.14 billion as output fell to the equivalent of 2.52 million barrels of crude a day from 2.6 million a year earlier, according to the statement.

Brent crude futures, the benchmark for two-thirds of the world’s oil, fell 2.4 percent during the quarter to an average of $109.42 a barrel. Worldwide crude output rose by 2.16 million barrels a day during the third quarter from a year earlier, four times faster than the 540,000-barrel-a-day increase in demand, according to an Oct. 12 report by the International Energy Agency.

Chevron’s performance also was diminished by a 29 percent decline in U.S. gas prices from a year earlier to an average of $2.893 per million British thermal units during the quarter. Horizontal wells and hydraulic fracturing have allowed explorers to penetrate gas-rich shale formations in the U.S. Great Plains, Appalachia and western Canada, leading to a North American supply glut.

Chevron has risen 4.7 percent this year, outperforming the 1.8 percent increase in Brent crude futures. The shares have 20 buy recommendations from analysts, eight holds and one sell rating.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

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

A man works on a Chevron Corp. sign at a gasoline station in San Francisco, California. Photographer: David Paul Morris/Bloomberg

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Companies Mentioned

  • CVX
    (Chevron Corp)
    • $112.93 USD
    • 3.90
    • 3.45%
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