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Chevron Q1 profit falls 64 per cent to $1.8B as oil prices drop
<b>John Porretto, THE ASSOCIATED PRESS </b><b>May 01, 2009</b>
<b>HOUSTON</b> – Hello The top international oil companies were expected to deliver the ugliest first-quarter results in several years, and there were few surprises.
<b><span style=”color:#0000cc”>Chevron Corp. capped off a bleak stretch of earnings reports for major oil producers Friday, posting net income that plunged 64 per cent from a year ago as it too was stung by lower oil and natural gas prices. </span></b>
<b><span style=”color:#0000cc”>For Chevron, the second-largest U.S. oil company, it marked the lowest quarterly earnings since 2003. </span></b>
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 the producer 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, which operates around the world, including Canada, said net income for the first three months of 2009 amounted to US$1.84 billion, or 92 cents per share. That compared with profits of $5.1 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, nine cents below the consensus estimate of analysts surveyed by <span style=”color:#07519a”>Thomson Reuters</span>. Those estimates typically exclude one-time items.
Chevron said total revenue fell 45 per cent to $36.1 billion from $65.9 billion in last year’s first quarter.
The company’s shares rose 36 cents to US$66.46 in trading on the New York Stock Exchange on 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.
<span style=”color:#ff0000″><b>Lower prices also crushed year-over-year results at four of Chevron’s biggest rivals – Exxon Mobil Corp.,</b> </span><b><span style=”color:#ff0000″>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 per cent from the same quarter last year. </span></b>
Chevron said income from its exploration and production operations tumbled 75 per cent 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 just $21 million in the first three months of 2009.
<b><span style=”color:#0000cc”>The reason was simple: Chevron’s average sales price per barrel of crude oil and natural gas liquids fell nearly 60 per cent from a year ago to $36. Comparable natural gas prices fell 45 per cent. </span></b>
On a positive note, Chevron said worldwide production rose about two per cent 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 four per cent 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 per cent to $423 million, as refining margins improved from last year because of cheaper crude.
<b>In Canada, Chevron’s wholly owned subsidiary, Calgary-based Chevron Canada, explores for, develops and produces crude oil, natural gas and gas liquids from the Alberta oilsands, off the East Coast and in the Western Arctic.</b>
In 2007, the net daily production of Chevron Canada was 35,000 barrels of liquids, five million cubic feet of natural gas and 27,000 barrels of tar-like heavy oil from oilsands.
The subsidiary also operates an oil refinery in the Vancouver area and a string of gasoline stations across <span style=”color:#07519a”>British Columbia</span>.