Chevron Corp.'s first-quarter earnings dropped 4.5% as moderating oil prices led to a drop in revenue despite an uptick in production.
The San Ramon, Calif., oil company reported Friday a profit of $6.18 billion, or $3.18 a share, down from $6.47 billion, or $3.27 a share, a year earlier. Revenue declined 6.4% to $56.82 billion.
Chevron, Exxon Mobil Corp., ConocoPhillips and other energy producers had turned their focus to oil production after newly deployed drilling technology including hydraulic fracturing, or fracking, led to a glut in natural-gas supplies and sharply lower prices. But as European and Chinese economies slowed and U.S. oil production surged, oil prices fell too. Chevron said its global oil prices fell 7.5% on average.
Exxon on Thursday reported flat first-quarter earnings as low U.S. crude oil prices helped its refining segment increase profit margins. Chevron's refining arm posted $701 million in profits, down 13% year-over-year as its refinery in Richmond, Calif., continued to be down for repairs after an August 2012 fire and its refinery in Pascagoula, Miss., underwent planned maintenance.
"They missed out on the tremendous benefit Exxon depended on in the [refining] business," said Brian Youngberg, senior energy analyst at Edward Jones.
Chevron's refineries will be "substantially back and fully operational" in the second quarter, said Patricia Yarrington, the company's chief financial officer, said in a call with investors.
Chevron, which is the second-largest U.S. oil company by market value after Exxon, said daily oil production in the U.S. was flat at 455,000 barrels a day, but dropped 2.5% at its international wells to 1.3 million barrels a day.
Chevron said it plans to restart production at four wells in the Frade field off the Brazilian coast. The wells, shut down after the Brazilian government complained about oil leaks found in the surrounding waters, will increase production slowly and should add 5,000 barrels a day to Chevron's second-quarter production, Ms. Yarrington said.
Meanwhile, its natural-gas business improved. Chevron, traditionally less focused on natural gas production than Exxon, said it sold nearly 10.6 billion cubic feet of gas a day in the first quarter, up 3.2% from the year before. Prices in the U.S. rose 25% to an average of $3.11 per thousand cubic feet, the company said.
Natural-gas prices got a boost as sales for home heating and power generation increased, sending prices in the U.S. to above $4 per million British thermal units in March. The natural gas business, which some energy companies had been fleeing because of low prices, could now help pad the bottom lines of Chevron and others, said Phil Weiss, analyst at Argus Energy.
"The impact in the first quarter isn't even as much as we'll see in the second quarter," Mr. Weiss said.
Chevron expects to start operations at its Angola LNG project in the second quarter, with production expected to reach 20,000 barrels of oil equivalent a day by the end of 2013, Ms. Yarrington said.
Overall exploration-and-production earnings fell 4.1% to $5.92 billion. Total oil and natural-gas production edged up 0.8% to 2.65 million barrels per day as project ramp-ups in the U.S. and Nigeria were largely offset by normal field declines, Chevron said.
Operating margin fell to 18.1% from 19.9%.
Melodie Warner contributed to this article.
Copyright (c) 2012 Dow Jones & Company, Inc.
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