(Reuters) - Chevron Corp (CVX.N) reported a 7 percent drop in quarterly profit on Friday as oil prices weakened from a year earlier, but fatter refining margins cushioned the blow.
Like its larger rival Exxon Mobil (XOM.N), Chevron was also hurt by the weakness in U.S. natural gas prices during the quarter, although Chevron’s earnings are less reliant on that fuel.
Still, the second-largest U.S. oil company easily topped Wall Street earnings forecasts, even though its average price for U.S. natural gas fell by 50 percent.
“I thought it was an outstanding quarter,” said Edward Jones analyst Brian Youngberg. “The downstream (refining) was the main reason for the beat.”
Second-quarter net income fell to $7.2 billion, or $3.66 per share, from $7.7 billion, or $3.85 per share, in the year-ago quarter.
Analysts on average forecast $3.24 per share, according to Thomson Reuters I/B/E/S.
The company’s upstream business - oil and gas production - posted an 18 percent profit drop to $5.6 billion, while its downstream refining business saw profit jump 80 percent to $1.88 billion.
The U.S. downstream operations saw profits rise 42 percent, while profits from the rest of the world more than doubled to $1.1 billion, helped by an asset sale in South Korea.
Chevron said earlier this month that industry benchmark margins on the Gulf Coast rose more than $4 per barrel to $24.89, while West Coast margins improved to $21.32 per barrel, their highest three-month average in four years.
Chevron’s largest refinery is in Mississippi, with 330,000 barrels per day of capacity, while its two California plants can together refine 518,000 bpd.
Total oil and gas production fell to 2.62 million barrels per day in the second quarter from 2.69 million bpd a year earlier.
Profits at Exxon Mobil fell short of expectations on Thursday as oil and gas output sagged and its chemical unit faced weak margins.
Shares in Chevron rose less than 1 percent to $108.50 in early trading.
Reporting by Matt Daily in New York and Braden Reddall in San Francisco; Editing by Gerald E. McCormick and John Wallace