Chevron rides high oil prices to 43% 2Q profit

Chevron Corp., the second-largest U.S. oil company, booked a 43 percent jump in quarterly profit, beating estimates as high oil prices

and fat refinery margins offset weaker output.

The numbers out Friday were the latest in a string of huge profits from the industry, which got a boost from the highest oil prices in nearly three years. Exxon Mobil Corp. and Royal Dutch Shell PLC also benefited from acquisitions and shifts into new projects. Chevron’s better-than-expected second-quarter performance was largely due to the strength of its U.S. and international refineries, according to Oppenheimer & Co. analyst Fadel Gheit.

Still, the oil and gas production business yielded nearly 90 percent of Chevron’s earnings. “This is the most leveraged company to oil price in the whole group,” Gheit said.

Its profit rose to $7.7 billion, or $3.85 per share, from $5.4 billion, or $2.70 per share, a year earlier. Analysts had expected $3.56 a share, according to Thomson Reuters I/B/E/S. Revenue rose 30 percent to $69 billion.

Shares of Chevron were down 0.7 percent, to $104.30, by midday on the New York Stock Exchange amid a broad sell-off.

Chevron reported 2.69 million barrels per day (bpd) of oil-equivalent output, compared with 2.75 million a year-ago.

Chevron trimmed its 2011 oil and gas production forecast to 2.76 million bpd due to a slower ramp-up of its Perdido project in the Gulf of Mexico and a pipeline problem in Thailand. Chevron had targeted 2.79 million bpd, or 1 percent growth.

“The full-year production impact of these two items is about 30,000 barrels per day and they are approximately split between the two,” said George Kirkland, vice chairman and executive vice president for upstream and gas.

But it stuck to its 2011-2014 average annual production growth target of 1 percent, and 4 to 5 percent for 2014-2017.

European benchmark Brent oil prices averaged $117 per barrel in the second quarter, up from $79 in the same quarter in 2010 and $11 higher than the first quarter. Chevron said in April that it switched to Brent from the U.S. benchmark when calculating production-sharing changes.

Higher crude prices mean Chevron must leave more production in the hands of state-owned partners. The new target still assumes oil prices of $79 per barrel, whereas with Brent at $111 per barrel Chevron sees output at 2.73 million bpd.

On Thursday, Exxon reported a 41 percent rise in quarterly profit that missed analysts’ forecasts.

Chevron shares are up 15 percent in 2011, outpacing an 8 percent rise in the Chicago Board Options Exchange oil companies index and a 10 percent rise in Exxon’s stock.


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