Chevron Reports a Net Loss
ChevronTexaco Corp. on Thursday wrote off most of its investment in troubled Dynegy Inc., resulting in a $904-million net loss for the third quarter.
Like other oil companies, San Francisco-based ChevronTexaco was hit by lower earnings in fuel refining and retailing because the slow economy damped sales and pricing during the quarter.
The loss, which amounts to 85 cents a share, contrasts with net income of $1.27 billion, or $1.19, in the third quarter last year. Revenue rose to $25.5 billion from $25.4 billion.
Wall Street found the results disappointing, pushing down ChevronTexaco’s stock price $3.77, or 5%, to $67.63 on the New York Stock Exchange.
The company said operating earnings for the July-September quarter fell to $1.2 billion, or $1.17 a share, from $1.7 billion, or $1.61, in the period last year.
Operating earnings do not include the write-down of ChevronTexaco’s 26.5% stake in Dynegy Inc. and other charges, which totaled $2.1 billion in the latest quarter. Analysts surveyed by Thomson First Call had expected average per-share earnings of $1.30.
Separately, Exxon Mobil Corp. and Royal Dutch/Shell Group reported lower earnings Thursday. Industry leader Exxon Mobil of Irving, Texas, said net income fell 17% to $2.6 billion, or 39 cents a share; Royal Dutch/Shell Group, based in London and Amsterdam, also reported a 17% drop in net income to $2.2 billion after accounting for special items.
But ChevronTexaco has its particular headaches, analysts said, pointing to the company’s investment in Houston-based Dynegy and continuing problems combining the operations of Chevron and Texaco since they merged in 2001. Dynegy reported a $1.8-billion third-quarter loss Wednesday, primarily due to charges from the deteriorating energy-trading business, which Dynegy is exiting.
Despite the net loss, ChevronTexaco Chief Executive David J. O’Reilly said “our employees have made tremendous strides in integrating the separate companies in this first year after the merger.”
ChevronTexaco drills for oil and natural gas around the world, refines oil into fuel and sells gasoline at 21,000 service stations worldwide.
Some analysts say ChevronTexaco is stronger than third-quarter results appear to indicate, adding that many of the problems were one-time events that should not affect future profitability.
ChevronTexaco’s stake in Dynegy was once worth $2.7 billion, but ChevronTexaco wrote down the value to $2 billion in the second quarter and further slashed the value on its books in the third quarter to $412 million.
ChevronTexaco’s third-quarter charges included its share of Dynegy’s third-quarter loss and a portion of the $566-million loss on the sale of Dynegy’s Northern Natural Gas pipeline. The company also reported $485 million in asset impairments, reflecting a lower value of certain assets than previously reported on the oil company’s books.
“There are some warts,” said Tyler Dann, an oil analyst with Banc of America Securities. “I get the sense that there are a number of issues related to cleanup of Texaco.”
ChevronTexaco said oil and natural gas production fell during the quarter because of production quotas by the Organization of the Petroleum Exporting Countries and disruptions in the Gulf of Mexico and elsewhere, leaving earnings in that segment unchanged at $1.3 billion.
Earnings in the refining, marketing and transportation segment fell to $92 million from $589 million. Chemicals operations posted a $138-million loss, compared with a $158-million loss in the period last year.
