Chevron Earnings Climb 12%
The twin furies of hurricanes Katrina and Rita damped what otherwise would have been an even rosier quarter for Chevron Corp., California’s largest oil company.
Chevron said Friday that the storms struck particularly hard at its facilities in the Gulf of Mexico region, where the San Ramon, Calif.-based business is the largest operator of offshore wells and runs a giant refinery in Pascagoula, Miss., that is capable of processing 325,000 barrels of oil a day.
“We basically had no refining capacity operating in the gulf for about half of the third quarter,” David O’Reilly, the company’s chief executive, said in a conference call with investors.
All told, the hurricanes cost Chevron $600 million in business during the third quarter and the hangover in the fourth quarter probably would be greater, O’Reilly said. Only 45% of Chevron’s gulf region oil production is back on line, he said.
Even with business lost to the storms, Chevron, the nation’s second-largest oil company, still managed to push net income up 12% to $3.6 billion, or $1.64 a share, from $3.2 billion, or $1.51, a year earlier. O’Reilly attributed the gain to “higher prices from crude oil and natural gas and improved refining margin.”
Revenue rose 34% to $54.5 billion. The quarter’s financial report included results for two months from the former Unocal Corp. operations, which Chevron purchased for $17.3 billion in August after a politically charged battle with China’s government-controlled CNOOC Ltd. for control of the El Segundo-based oil concern.
Chevron’s profit missed the $1.91-a-share estimate that analysts surveyed by Thomson Financial had predicted. But the stock still managed a small gain in Friday trading, up 88 cents at $57.38.
The financial fallout from the hurricanes was especially evident when compared with the reports this week from other large companies that were not as dependent on the gulf region.
On Thursday, Exxon Mobil Corp. reported that its earnings soared 75% to $9.9 billion in the third quarter on $100.7 billion in sales.
Royal Dutch Shell said its profit rose 68% to $9 billion on $76.4 billion in revenue.
Now, the industry is facing a new storm -- one of criticism -- arising from the record earnings tallied by oil companies this week.
A coalition of eight Democratic governors renewed their calls Friday for a federal price-gouging investigation.
“Oil companies are making record profits while working American families struggle to heat their homes and keep fuel in their vehicles,” said Gov. Bill Richardson of New Mexico.
Republicans have also expressed alarm over the combination of historically high gasoline prices and oil industry profits that are larger than the economic output of entire nations.
After seeing Exxon’s report, Senate Majority Leader Bill Frist (R-Tenn.) called for an investigation of possible profiteering.
Consumer advocates have complained that Chevron and other oil companies haven’t built a domestic refinery in almost three decades, even though demand for gasoline and diesel fuel has soared.
O’Reilly said Chevron was making incremental improvements to existing refineries to help increase fuel supply, including expansions at its facilities in El Segundo and Pascagoula.
“We don’t feel we need to build a grass-roots refinery,” he said, “but we have the capability and the space assuming we can get the permits to expand capacity at a number of existing refineries.”
