Chevron profit down on reduced output, weak refining
By Braden Reddall
(Reuters) - Chevron Corp posted earnings on Friday that were much lower than expected as maintenance exacerbated a decline this year in oil and natural gas production, and shares of the second-largest U.S. oil company slid 2.5 percent.
Third-quarter production fell to 2.52 million barrels of oil equivalent per day from 2.60 million bpd a year earlier. With a fourth-quarter bounce expected, Chevron expected 2012 production to average about 2.6 million bpd, or 97 percent of its original 2.68 million bpd target.
Increasing output from the wellhead is a struggle for many big oil companies, including Exxon Mobil Corp and Royal Dutch Shell. With oil and gas assets tightly controlled by the countries where they are located, the majors are left to drill in pricier areas on land and offshore.
Smaller U.S. oil company Hess Corp, on the other hand, delivered on Friday a strong increase in profits and production owning to its interest in the Bakken oil basin in North Dakota, and a resurgent Libya operation.
For Chevron, the third quarter was marred by a huge fire at its Richmond refinery in California that damaged the crude unit there and now expected to be repaired in the first quarter. However, the company said this had a limited impact on third-quarter earnings, which were hit hard by weak marketing margins.
Overall, third-quarter net income fell to $5.25 billion, or $2.69 per share, from $7.83 billion, or $3.92 per share, a year earlier. Earnings dropped 17 percent to $5.1 billion in the oil and gas production business and plunged 65 percent to $689 million in the refining, or downstream, operation.
"Downstream was the primary culprit behind the miss," Simmons & Co analysts said in a note to investors.
The reported profit included about $600 million from an asset sale gain, offset by a negative foreign exchange impact, they said. Leaving out certain items, Chevron earned $2.55 per share, compared with the analysts' average estimate of $2.83, according to Thomson Reuters I/B/E/S. Continued...