Chevron profit is pumped up by fuel prices
Chevron Corp. on Friday became the latest oil company to report a first-quarter profit spurt from the high gasoline prices that have plagued motorists for months.
The San Ramon, Calif.-based company said earnings from making and selling gasoline pumped up its first-quarter net income by a stronger-than-expected 18%.
So far, Exxon Mobil Corp., Valero Energy Corp., BP and ConocoPhillips have posted big gains from the production and sale of fuel during the first three months of 2007. Royal Dutch Shell and Tesoro Corp. will report their results next week.
All of those companies have large refinery operations in California, where average pump prices crossed the $3-per-gallon mark seven weeks ago and are poised to surpass the record average of $3.332 a gallon set last May.
Earlier this week, a Shell station in West Los Angeles raised the price for self-serve regular 14 cents a gallon overnight to $3.89.
On Friday, Chevron said net income in the first three months of 2007 totaled $4.7 billion, or $2.18 a share, up from nearly $4 billion, or $1.80, for the year-earlier period.
The results were boosted by the sale of an overseas refinery and by refinery income that rose sharply despite an extended outage at Chevron’s facility in Richmond, Calif.
“A company that seems barely able to keep its refineries running and saw oil prices dip from last year took advantage of an uncompetitive market to make up its losses with spiking gasoline prices,” said Judy Dugan, research director at the Foundation for Taxpayer and Consumer Rights, a consumer group based in Santa Monica.
Chevron and other U.S. refiners have said the higher refining income is a reflection of steady demand and supply stresses caused by production cutbacks at plants undergoing planned and unplanned maintenance.
Profits at Chevron’s largest business, exploration and production of oil and natural gas, fell by nearly 16% to $2.9 billion, reflecting flat production levels and lower worldwide commodity prices.
Refining and marketing operations soared 180% to $1.6 billion, boosted by a $700-million gain from selling Chevron’s stake in a Netherlands refinery and related assets.
In the U.S., where Chevron owns two California refineries and three outside the state, net income jumped 67% to $350 million. The profit increase came even though Chevron processed 22% less crude oil and a fire added a month to a planned outage at its Richmond plant.
“It should have been a mega-quarter, but the fact that Richmond was down and that represents about half their California presence, made a really significant dent,” said Mark Gilman, oil analyst at Benchmark Co.
Analysts have taken note of exceptionally high U.S. refining margins, which subtract the cost of crude oil from the sale price of gasoline and other products. The calculation is considered an indicator of profit even though it doesn’t account for other operating costs.
Chevron said its West Coast refining margin averaged $26.69 per barrel, or 63.5 cents a gallon, in the first quarter of 2007, up from $18.32 per barrel, or 43.6 cents a gallon, in the same quarter last year.
After adjusting the results to remove non-operating items, Chevron’s first-quarter profit was $1.92 a share, according to analyst Bruce Lanni at AG Edwards. The average expectation from analysts surveyed by Thomson Financial was $1.67 a share.
Chevron made no mention Friday of its troubles in Ecuador, where the company is facing trial over allegations that Texaco, now part of Chevron, caused $6 billion in environmental damages while extracting oil there. On Friday, Ecuadorean President Rafael Correa called an earlier certification that the region was cleaned up a “fraud for the country.”
Shares of Chevron fell a dime Friday to $78.08. The stock is up almost 11% since the start of the year.
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elizabeth.douglass@latimes.com
The Associated Press was used in compiling this report.
