Oil Watchdog

Chevron Corp. said Friday that it rang up a record quarterly profit
of $5.4 billion, primarily thanks to soaring gasoline prices and gains
from an investment sale.

The oil giant’s net income for the second quarter that ended
June 30, equal to $2.52 a share, was up 24% from the $4.4 billion, or
$1.97 a share, it earned in the year-earlier period.

With those results, Chevron set a new high for quarterly
earnings, surpassing the $5 billion it earned in the third quarter of
2006. The San Ramon, Calif.-based company is on pace to beat last
year’s record annual income of $17.1 billion.

Friday’s report capped another week of strong earnings from
the world’s biggest publicly owned oil companies, even though the lack
of one-time items caused profit at Exxon Mobil Corp. to come in lower
than in the second quarter of 2006.

Profits have been surging industrywide over the last three
years, with oil and natural gas prices rising far more quickly than the
cost of extracting and selling the commodities.

Chevron’s flagship business of exploring for and producing oil
and natural gas remained the company’s biggest money maker, but the
headliner for the quarter was the refining and marketing segment, which
makes and sells gasoline, diesel and other oil byproducts.

The high retail prices that have sparked renewed grumbling from
consumers yielded Chevron’s strong results. Income from the company’s
refining and marketing operations jumped 30% to $1.3 billion.

Much of the strength came from U.S. operations, where quarterly
profit from the manufacture and sale of gasoline rose to $781 million,
up 41% from $554 million in the year-earlier quarter. Chevron curtailed
production at its El Segundo refinery for the last month of the quarter
to conduct maintenance and upgrades — but brought in imports and kept
producing some gasoline at the plant.

Oil company critic Judy Dugan was quick to condemn the higher refining profits.

"Chevron and the other major oil companies profited greatly from
failure: long outages at refineries, aging equipment and lack of new
capacity," said Dugan, research director at the Santa Monica-based
Foundation for Taxpayer and Consumer Rights. Chevron, she added,
"boosted profit to a new record as consumers paid outrageous prices at
the pump."

For Chevron, "refining margins were nothing short of
spectacular — in part from their own downtime," said Mark Gilman, an
oil analyst at Benchmark Co. "It’s not manipulation… They’re not
taking these refineries down for giggles. But there’s certainly a
margin benefit from it."

Since the end of June, retail gas prices have eased nationwide,
but oil prices have jumped back up, closing Friday at $77.02 a barrel,
just a penny shy of the record high close set last July.

Chevron’s second-quarter earnings also benefited from a net
gain of $520 million stemming from $680 million in income from the sale
of Dynegy Inc. shares and a $160-million loss on the redemption of
debt. Not counting those items, Oppenheimer & Co. analyst Fadel
Gheit said Chevron’s earnings totaled $4.9 billion, or about $2.27 a
share — below analysts’ average estimate of $2.30, according to a
survey by Thomson Financial.
The company’s exploration and production business recorded $3.6 billion
in income for the quarter, an 11% increase from $3.3 billion in the
second quarter of 2006.

Total worldwide production equated to 2.63 million barrels of
oil a day for the three months, down about 1% because of lower U.S.
production and ownership changes at its Venezuelan venture.

Revenue rose almost 5%, to $56.1 billion. The company also bought back $1.75 billion of its own shares.
Chevron stock closed down $2.26 to $85.20 on Friday.
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