Chevron 1Q profit falls 64 pct as oil prices drop
HOUSTON — The top international oil companies were expected to deliver the ugliest first-quarter results in several years, and there were few surprises.
Chevron Corp. capped off a bleak stretch of earnings reports for major oil companies Friday, posting net income that plunged 64 percent from a year ago as it too was stung by lower oil and natural gas prices.
For Chevron, the second-largest U.S. oil company, it marked the lowest quarterly earnings since 2003.
After years of rising prices and robust profits, the oil and gas sector is trying to adjust to vastly different market conditions. In the ongoing recession, people simply aren’t using as much energy.
It wasn’t all bad news at Chevron. Because it and other integrated oil companies must buy oil to make fuel for everything from planes to automobiles, lower crude prices actually helped lift earnings at its refining business, and its overall oil production increased from a year ago.
The San Ramon, Calif.-based company said net income for the first three months of 2009 amounted to $1.84 billion, or 92 cents per share. That compared with $5.17 billion, or $2.48 per share, in the quarter a year ago.
The most-recent results included gains of about $400 million, or 20 cents per share, for the sale of marketing assets. Adjusted for those items, earnings amounted to 72 cents a share, 9 cents below the consensus estimate of analysts surveyed by Thomson Reuters. Those estimates typically exclude one-time items.
Chevron said total revenue fell 45 percent to $36.1 billion from $65.9 billion in last year’s first quarter.
The company’s shares rose 77 cents to close at $66.87 Friday. Their 52-week range is $55.50 to $104.63.
The biggest difference from a year ago is the price of oil, which spent most of 2008 at triple-digit levels and contributed to enormous profits before collapsing. A barrel of crude was trading Friday at around $53 on the New York Mercantile Exchange.
Natural gas prices have fallen sharply as consumers scale back consumption and inventories grow.
Lower prices also crushed year-over-year results at four of Chevron’s biggest rivals — Exxon Mobil Corp., ConocoPhillips, BP PLC and Royal Dutch Shell PLC. Collectively, Chevron and those four companies earned about $13.3 billion in the first quarter, down 63 percent from the same quarter last year.
Chevron said income from its exploration and production operations tumbled 75 percent in the quarter to $1.27 billion. The company was particularly hard hit in the U.S., where earnings plummeted from $1.6 billion a year ago to $21 million in the first three months of 2009.
The reason was simple: Chevron’s average sales price per barrel of crude oil and natural gas liquids fell nearly 60 percent from a year ago to $36. Comparable natural gas prices fell 45 percent.
On a positive note, Chevron said worldwide production rose about 2 percent from a year ago, in part from last year’s startup of deepwater projects in Nigeria and the U.S. Gulf of Mexico. The company has said it expects to increase production by 4 percent this year as it continues to develop new oil and gas projects.
“One quarter does not make a trend, but this is a very good start,” said Paul Cheng, an analyst with Barclays Capital. “It does look like they have the potential of beating their own (production) estimate.”
Excluding gains from the sale of marketing businesses in Nigeria and Brazil, Chevron’s earnings at its refining, marketing and transportation arm rose 68 percent to $423 million, as refining margins improved from last year because of cheaper crude.
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