Chevron Earnings Hit Record
Despite steep hurricane-related costs, oil giant Chevron Corp.’s profit jumped to a record $4.1 billion in the fourth quarter, boosted mostly by the same high oil, natural gas and gasoline prices that have stretched household budgets and enraged politicians over the last year.
Chevron’s quarterly earnings were up 20% compared with $3.4 billion a year earlier. However, the per-share results of $1.86, up from $1.63 a share in the fourth quarter of 2004, were 3 cents below analyst expectations, according to a survey by Thomson Financial.
The company, based in San Ramon, Calif., was among the industry’s hardest hit when hurricanes Katrina and Rita struck the Gulf Coast late last year, downing a major Chevron refinery and damaging production rigs. Chevron said the resulting repair costs and lost profit cut earnings by more than $700 million in the fourth quarter, which ended Dec. 31.
Revenue for the quarter rose to $53.8 billion, up 26% from the same period a year earlier. The company had $11 billion in cash as of Dec. 31, after spending $755 million in the fourth quarter to buy back shares.
On Wall Street, traders initially pushed Chevron’s stock higher. It then sank into negative territory for much of the day before finally closing at $60.38, up 16 cents, on a day when the broad market rallied.
“The hurricane impact significantly exceeded everybody’s highest estimate,” said Oppenheimer & Co. analyst Fadel Gheit, who owns Chevron shares and rates it a “buy.” “Being in the Gulf of Mexico and being in the path of the hurricanes, there’s nothing you can do about that.”
Chevron Chief Executive David O’Reilly said Gulf Coast oil and natural gas production -- 300,000 barrels a day before the storms -- was limited to almost half that, or 160,000 barrels a day, in the fourth quarter. Of the remaining 140,000 barrels of daily production still shut down by storm damage, O’Reilly said: “We’ve recovered the easy-to-recover portion in the Gulf of Mexico.... There could be 20,000 barrels per day that we just won’t ever get to recover because it’s not economic.”
The company produced an average of 2.7 million barrels a day of oil and natural gas for the quarter, up 11% from a year earlier. That production increase had an amplified effect on the company’s financial results because of sharp increases in the prices for natural gas and oil. Crude oil ended 2005 at about $61 per barrel, up from about $43 at the end of 2004.
For politicians angry about the high cost of gasoline, heating oil and natural gas, the record profit posted by Chevron -- and earnings yet to come from Exxon Mobil Corp. on Monday -- reinforce their belief that oil companies are profiting at the expense of consumers.
Some state and federal lawmakers have threatened to impose a windfall profits tax on the companies. On Friday, Sen. Barbara Boxer (D-Calif.) blasted Chevron’s high profit and the lack of action from the Federal Trade Commission.
“You’d think FTC stood for ‘Friend to Chevron’ with the way they sit back and let these companies gouge consumers,” she said in a statement.
Oil companies have said the high prices are set by the market and that their profits are not excessive.
Chevron’s purchase of Unocal Corp., which closed in the third quarter, bolstered production and will help the company keep production at 2.7 million to 2.8 million barrels a day in 2006.
The exploration and production side of Chevron’s business booked earnings of $3.3 billion for the quarter, up 45% from a year earlier.
Chevron’s strong quarterly results helped produce record full-year earnings of $14.1 billion, or $6.54 a share, compared with 2004 profit of $13 billion, or $6.28.
