ChevronTexaco CEO Says Profit ‘Unsatisfactory’
Dragged down by merger costs and losses at its refineries, ChevronTexaco Corp. on Friday reported lower-than-expected fourth-quarter profit of $904 million.
San Ramon, Calif.-based ChevronTexaco, the nation’s second-largest oil company, said its net income was 85 cents a share for the quarter ended Dec. 30, a reversal from 2001 when a host of special charges caused a fourth-quarter loss of $2.5 billion, or $2.38 a share.
The company still badly missed analyst estimates, and Chairman and Chief Executive Dave O’Reilly bluntly pronounced his company’s latest results “completely unsatisfactory” during a conference call Friday with analysts and investors.
“I can assure you that we expect better outcomes in the future,” O’Reilly said.
He noted that the company has cut spending on less profitable projects and has conducted a rigorous review of all its operations, with an eye toward shedding some of them once restrictions connected to Chevron’s merger with Texaco expire.
O’Reilly said that expenses related to the October 2001 merger were largely absorbed, and that the combined company would achieve its promised $2.2 billion in cost savings by the end of April.
Investors reacting to the report initially sent ChevronTexaco shares down 3% to $62.11 in New York Stock Exchange trading. The shares then reversed course amid a general rise in the oil sector and closed up 20 cents to $64.40. ChevronTexaco shares have fallen 30% in the last year.
“We’re all disappointed,” said Fadel Gheit, senior energy analyst at Fahnestock & Co., who rates ChevronTexaco a “buy” and holds shares in the company.
“It’s a mixed bag of good news and bad news,” he added, “but mostly bad news.”
Specifically, the same higher gas and oil prices that boosted operating profit at ChevronTexaco’s exploration and production business also squeezed margins and produced fourth-quarter losses for the company’s refineries, transportation and gas station operations.
ChevronTexaco said the higher cost of crude and a drop in diesel demand because of the tepid economy triggered an operating loss of $151 million for the refinery and marketing side of the corporation.
That shortfall lopped more than 15 cents a share off the company’s quarterly results, Gheit said.
Not counting special items, ChevronTexaco produced a fourth-quarter operating profit of $1.1 billion, or $1 a share, compared with operating profit of $498 million, or 47 cents, for the same period in 2001.
Wall Street analysts had expected operating profit of $1.28 a share, according to a survey by IBES International.
For 2002, ChevronTexaco posted net income of $1.1 billion, or $1.07 a share, down from 2001 net income of $3.2 billion, or $3.09. Revenue fell nearly 7% to $99 billion.
