Chevron Corp. said Tuesday it expects its third-quarter profit to be substantially hit by Hurricane Isaac and an August fire at a California refinery.
Isaac, which reached Category One status before making landfall in southeast Louisiana in August, prompted oil producers in the U.S. Gulf of Mexico, which accounts for about a quarter of the country's oil output, to evacuate offshore platforms and stop production for more than week. Chevron, the second-largest U.S. oil company in market value behind Exxon Mobil Corp., said the storm caused its Gulf of Mexico average production for the first two months of the third quarter to fall 19,000 barrels a day below second-quarter production. Flooding from the storm also caused extended downtime at its 330,000 barrel-a-day refinery in Pascagoula, Miss.
A major fire at Chevron's 245,000 barrel-a-day refinery in Richmond, Calif., also forced a drop in production. A major oil processing unit at the refinery will be down through the fourth quarter, Chevron said.
In all, the drop in oil, gas and fuel production will result in Chevron's third-quarter earnings being "substantially lower" than in the previous quarter, the San Ramon-based company said in its interim report released after the market closed Tuesday.
The announcement came as a surprise to some analysts. "This is a lot more negative than we expected," said Fadel Gheit, senior energy analyst at Oppenheimer & Co.
Chevron shares fell 1.5% to $115.88 in after-hours trading.
Chevron said adverse foreign exchange rates added to the drag on profits. Some of that could have come from the relative strength of the Australian dollar, which raises the costs of Chevron's development of its mammoth Gorgon and Wheatstone natural gas fields in Western Australia, Mr. Gheit said.
Chevron's U.S. production in the first two months of the quarter reached about 640,000 barrels of oil equivalent a day, down 3.3% from a year ago and 2.9% below second quarter output. The average realized price for crude oil from the company's U.S. fields was $95.44 a barrel, down from $101.27 a year earlier, and from $103.91 in the second quarter.
Average international output reached about 1.88 million barrels of oil equivalent a day, down 3% from a year ago, and 4.4% from the second quarter. Most of the decline was related to planned maintenance in Kazakhstan and the U.K.
The spot price for Brent crude oil fell 4.7% from a year earlier, and edged down 0.3% quarter-over-quarter. Chevron's average realized natural-gas price abroad was 8.9% higher year-over-year, but down 1.8% sequentially.
In its fuel production business, production during July and August dropped to 836,000 barrels a day, down nearly 7% from the third quarter of 2011.
The company expects production to increase in the fourth quarter, compared with the third quarter, as production is restored in the Gulf of Mexico.
Chevron is slated to report full third-quarter results on Nov. 2.
Copyright (c) 2012 Dow Jones & Company, Inc.
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