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Chevron's profit soars in quarter | Oil Watchdog

Chevron's profit soars in quarter

Sat, Jul 28, 2007 at 11:31 am

    Chevron's profit soars in quarter

    July 30, 2007

    by David R. Baker, Chronicle Staff Writer

    Chevron’s profit soars in quarter

    This spring’s punishing oil and gasoline prices helped propel
    Chevron Corp. to the highest quarterly profit in its 128-year history
    — $5.38 billion — the San Ramon company reported Friday.

    That’s 24 percent more money than Chevron made in the same
    quarter last year and easily beats the company’s previous record of
    $5.02 billion set in last year’s third quarter. Chevron’s profit for
    the first six months of this year now stands at $10.1 billion, compared
    with $8.35 billion for the first half of 2006.

    Much of the second-quarter jump in profit came from the sale of
    a company, not gasoline. Chevron sold its stake in Houston energy
    business Dynegy, pumping up profit by $680 million.

    But Chevron, the nation’s second-largest oil company, also
    benefited from a record-setting rise in gasoline prices. The national
    average for a gallon of regular hit $3.23 in May and has since fallen
    to $2.92. California’s average peaked at $3.49 and now stands at $3.10.

    Profit for Chevron’s refining, marketing and transportation
    operations in the United States reached $781 million in the second
    quarter, a 41 percent jump from the same period last year.

    Consumer advocates have long suspected oil companies of
    manipulating prices, and this spring was no exception. The price spike
    was caused by mechanical problems at gasoline refineries — not by an
    increase in the cost of crude oil — and advocates questioned whether
    the oil companies weren’t deliberately cutting supplies to increase the
    price, perhaps by extending repairs at the refineries.

    "You can’t justify gasoline prices with oil prices, at least
    not in the second quarter," said Judy Dugan with the Foundation for
    Taxpayer and Consumer Rights. "American drivers are disproportionately
    paying at the pump to boost corporate bottom lines."

    Oil industry representatives call such charges absurd.

    Finding spare supplies of gasoline when a refinery shuts down
    usually costs the companies, they say. They also note that not all
    refinery downtime raises gasoline prices. Chevron spokeswoman Stephanie
    Price pointed to her company’s recent upgrade of its huge refinery in
    El Segundo (Los Angeles County).

    "The El Segundo refinery went down at the beginning of June,
    and prices actually decreased," she said.
    With gasoline prices falling across the country, Chevron’s refineries
    probably aren’t making as much money now as they did during the second

    Oil companies don’t reveal precise profit figures for
    refineries. But one rough measure of profit for all refineries on the
    West Coast shows that they have dropped by two-thirds since peaking in
    early May.
    To Wall Street analysts, that suggests that gasoline prices will keep

    "You might see a bit of a spike before school starts, but
    they’re not going to get anywhere near the level they were at around
    Memorial Day," said analyst Justin Perucki, with the Morningstar
    research firm.
    Chevron’s report capped a week of strong earnings for the biggest
    international oil companies.

    BP’s profit rose 1.5 percent to $7.38 billion. Exxon Mobil’s
    profit dipped 1 percent but still hit $10.26 billion. Shell jumped 18
    percent to reach $8.67 billion for the quarter.

    Only ConocoPhillips suffered, with its profit plunging 94
    percent to $301 million. But that was due to the company’s decision to
    pull out of Venezuela rather than accept President Hugo Chavez’s terms
    for staying and converting Conoco’s operations into a joint venture
    with the state-run oil company. ConocoPhillips wrote off $4.5 billion
    as a result.

    Despite the rosy results for most companies, there were a few
    hints of trouble. The amount of crude oil pumped from the ground in the
    second quarter fell for BP, Chevron, Exxon and Shell. Production from
    oil fields naturally declines with time, and all oil companies face
    constant pressure from investors to find and tap more fields.

    Chevron’s production worldwide slipped about 1 percent, to 2.63
    million barrels per day. The company has announced delays in starting
    production at Tahiti, an oil field deep in the Gulf of Mexico, and Wall
    Street is anxious to see more of Chevron’s development projects

    "Tahiti already had some delays, and we don’t want to see any
    more like that," said Philip Weiss, senior analyst with Argus Research.
    "Because that’s really the key with Chevron, coming through with some
    of the stuff that’s in the pipeline."

    Chevron spent $4.5 billion in the second quarter on exploring for oil, drilling wells and upgrading refineries.

    Total revenue for the quarter topped $56.09 billion, up 4.7
    percent from $53.54 billion in the same quarter last year. The
    company’s profit this year also benefited from a lack of hurricanes. In
    the second quarter of 2006, Chevron was still paying for repairs to
    Gulf of Mexico platforms and pipelines damaged by Hurricanes Katrina
    and Rita in 2005.


    2nd Quarter:
    2007 Revenue: $56,094,000,000
    2007 Net profit: $5,380,000,000
    2007 Share earnings: $2.52

    2006 Revenue: $53,536,000,000
    2006 Net profit: $4,353,000,000
    2006 Share earnings: $1.97

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