Chevron profit off on gas prices, mirrors industry

Chevron Corp. , the No. 2 U.S. oil company, said on Friday its fourth-quarter profit fell 9 percent, pulled down by weaker natural gas prices that have pared record earnings across the industry.

The decline in Chevron’s profit mirrors similar fourth-quarter drops at U.S. rivals Exxon Mobil , ConocoPhillips , and Marathon Oil Corp. — a trend analysts say could mean the companies have passed a peak in the earnings cycle, at least in the near-term.

Net income in the quarter dropped to $3.77 billion, or $1.74 a share, from $4.14 billion, or $1.86 a share, in 2005.

That result came in just ahead of the average forecast of analysts polled by Reuters Estimates of $1.73 a share.

Revenue in the quarter fell to $47.75 billion from $53.79 billion last year.

Chevron replaced about 70 percent of the oil and gas it produced in 2006, according to U.S. Securities and Exchange rules that prevent Chevron from counting oil it adds through its oil sands mining operation in Canada.

Including those operations, the company said it replaced 101 percent of its 2006 production — 950 million barrels of oil equivalent.

But about 30 percent of those additions came from the company’s mining operations at the Athabasca Oil Sands project in Canada. Under rules set by the Securities and Exchange Commission, crude oil extracted by those methods can not be counted to its reserves, and it only replaced about 70 percent of 2006 production.

Earnings at the company’s exploration and production business fell to $2.91 billion from $3.25 billion last year.

Production in the quarter was 2.66 million barrels per day, about even with the 2005 period.

“They seem to be doing what they said they would do, and they didn’t stumble anywhere along the line,” said National City Private Client Group analyst James Halloran.

“They are continuing to get decent volumes out of their upstream, at least they are keeping up with their decline rates. They seem to have some decent prospects down the road, but you’re going to have to be patient over the next couple of years to see some of that volume come on board for them,” he said.

San Ramon, California-based Chevron said its average price for a barrel of crude oil in the U.S was $51 in the fourth quarter, down about $1 from 2005. Internationally, its price for crude oil rose over $1 to $52 a barrel.

But its average price for natural gas in the U.S. plunged 42 percent to $5.90 per thousand cubic feet in the quarter, while its international price rose 5 percent to $3.67 per thousand cubic feet.

Earnings at Chevron’s refining, marketing and transportation unit rose to $954 million from $808 million as foreign exchange effects at its international operations helped offset lower refining margins.

Chevron’s chemicals business posted a profit of $124 million, up from $71 million in 2005 on better margins for its lubricants and fuel additives.

Chevron shares fell 75 cents, or 1 percent, to $73.71 in morning trading on the New York Stock Exchange.

Since the end of the 2006 third quarter, they are up 13.6 percent, outperforming the Chicago Board Options Exchange’s oil index, which has risen 8.5 percent.

Source: Reuters