Chevron Misses Profit Forecasts
Despite record-high fuel prices, ChevronTexaco Corp. on Friday reported weaker-than-expected first-quarter profit partly because of maintenance costs at its three major U.S. refineries.
Still, earnings at the second-largest U.S. oil company rose nearly 4% compared with a year earlier as big gains from oil and natural gas sales and from its petrochemical business fueled ChevronTexaco’s 10th straight quarter of rising profit.
“Quarterly profits ... again benefited from strong prices for both crude oil and natural gas,” said Chairman and Chief Executive Dave O’Reilly. But he added that profit from refining operations was hurt by “downtime at several of our refineries.”
For the three months ended March 31, the San Ramon, Calif.-based company reported net income of $2.7 billion, or $1.28 a share, up from $2.6 billion, or $1.20, a year earlier. Quarterly revenue climbed 22% to $40 billion because of higher gasoline prices.
Analysts surveyed by Thomson First Call were expecting earnings of $1.38 a share, but refinery maintenance, especially at the company’s El Segundo and Richmond, Calif., refineries, added $200 million of costs, the company said. In addition, the company took a $248-million charge related in part to lower earnings at Dynegy Inc., a troubled energy trading firm ChevronTexaco invested in.
“Still, if you remove those charges, their numbers are good,” said Fadel Gheit, an analyst at Oppenheimer & Co. “With $50-a-barrel prices for oil, how can they not be? You can’t not like oil stocks right now.”
Indeed, the company’s shares gained 85 cents $52 on the New York Stock Exchange on Friday, even as oil prices closed below $50 a barrel for the first time since Feb. 18.
The company received an average of $40.42 for each barrel of oil it sold during the quarter, up 38% from a year earlier.
ChevronTexaco typically doesn’t provide earnings forecasts. However, analyst Jacques Rousseau at Friedman Billings Ramsey on Friday raised his full-year profit estimate for ChevronTexaco from $5.15 a share to $5.20.
Rousseau said he expected higher refining earnings would “more than” offset the softer-than-expected first-quarter results, and he maintained his $62-a-share price target on the stock.
O’Reilly said ChevronTexaco planned to develop new fields in South America, Southeast Asia, Africa and Australia in an effort to halt the company’s three-year decline in output.
In early April, ChevronTexaco, agreed to buy Unocal Corp. for $16.4 billion, a move that will add 15%, or about 13 billion barrels of oil, to the company’s oil and natural gas reserves. The deal had no effect on the first-quarter earnings and is still contingent on approval from Unocal shareholders and regulatory agencies, analysts said. Chevron executives told analysts during a Friday conference call that they would not discuss the merger.
Earlier this week, ChevronTexaco said it would increase quarterly dividend by 12.5% to 45 cents a share.
