Refining Business Boosts ChevronTexaco's Net 33%

SUSAN WARREN / Wall Street Journal 30apr04

ChevronTexaco Corp. said first-quarter earnings leapt 33% as high energy prices took the sting out of falling production.

The San Ramon, Calif., oil and natural-gas company reported net income of $2.56 billion, or $2.40 a share, compared with $1.92 billion, or $1.81 a share, in the year-earlier quarter. Revenue rose 9.1% to $33.57 billion from $30.76 billion.

The results were driven by surging profits in the company's refining and marketing segment, where income from continuing operations more than doubled to $640 million from $315 million in last year's quarter. A key factor were profits from record gasoline prices in California and along the West Coast, where ChevronTexaco has a particularly strong presence.

ChevronTexaco's chemical segment also saw a vast improvement, reporting income of $74 million, up from $3 million last year.

The fat profits helped obscure less-encouraging numbers attached to the energy company's production of oil and natural gas, which fell an overall 1.8% world-wide to 2.6 million barrels a day, including less conventional oil-sands production. Part of the decline was the result of asset sales. But, like its competitors, ChevronTexaco also is struggling to replace production from aging fields.

On a global basis, production of oil and natural gas liquids fell 3.7% to 1.76 million barrels a day, excluding oil sands, and natural gas production fell 6.1% to 4.2 billion cubic feet a day. In the U.S., total oil-equivalent production was down 9.9%.

However, income from its exploration and production segment rose slightly less than 1% as high oil and natural gas prices offset the production declines. ChevronTexaco said it realized a price of more than $30 a barrel for oil in the first quarter in the U.S., while U.S. natural gas fetched $5.23 per thousand cubic feet.

ChevronTexaco spent more money in the quarter on exploration and production, which accounted for more than 75% of total spending of $1.68 billion. The company increased its spending in international oil fields by 3.8%, and in the U.S. by 22% over the previous year's quarter.