Chevron 1Q profit falls as oil prices drop
Chevron Corp. capped off Big Oil’s weakest showing in years Friday when it announced its worst quarterly earnings since the last three months of 2003.
In January, the nation’s second-largest oil company was talking to investors about its best profit year ever in 2008. On Friday, Chevron officials said first-quarter profit fell 64%.
Still, the San Ramon, Calif., company remained in the black, reporting net income of $1.84 billion, or 92 cents a share. That compared with $5.17 billion, or $2.48, a year earlier.
Sales fell 45% to $36.1 billion from $65.9 billion last year.
Some analysts said a better indicator of Chevron’s health in a down market was how well it was delivering on its projects and production schedules.
Fadel Gheit, senior energy analyst for Oppenheimer and Co., said Chevron managed to raise production even in a quarter where some of its resources had not fully recovered from last season’s hurricane damage in the Gulf of Mexico.
Phil Weiss, an analyst for the independent investment research firm Argus Research, said that considering the global recession and sluggish demand, Chevron had a “decent” first quarter. “Their refineries are running better,” Weiss said. “They are bringing new production online.”
For their part, Chevron officials chose to emphasize what the company is doing to reduce costs at a time when oil is selling for nearly two-thirds less than at its record 2008 peak of more than $147 a barrel.
Chevron officials said efficiencies and cost cutting had helped them trim expenses by $500 million compared with the first quarter of 2008.
“We’re driving for lower cost across the enterprise. We’ve had well over 1,000 individual meetings with key suppliers at the local, regional, national and global levels in pursuit of lower costs,” said Patricia E. Yarrington, Chevron vice president and chief financial officer, later adding, “We’re driving our own activities to be more cost-effective and efficient.”
The motivation for running a lean ship comes in part from oil futures that are running at only slightly better than one-third of last year’s record. Crude oil futures for June delivery rose $2.08 to $53.20 a barrel Friday on the New York Mercantile Exchange, the highest close since March 26.
Natural gas prices are also running sharply below last year’s pace as business and consumers have scaled back their energy use. Chevron said exploration and production income fell 75% in the first quarter to $1.27 billion, dragged down by lower prices. Domestic earnings fell from $1.6 billion to just $21 million.
Chevron officials said they were pleased that oil and natural gas production rose about 2% from a year ago, in part from projects in Nigeria and the Gulf of Mexico.
Investors sent Chevron shares up 77 cents to $66.87.
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