Chevron Sees 4Q Earnings Well Below 3Q

HOUSTON (Dow Jones Newswires), Jan. 11, 2012

Chevron warned investors Wednesday that it expects its fourth-quarter 2011 earnings to be "significantly" lower than in the preceding quarter, when higher margins and the sale of a major refinery buoyed results.

The second-largest U.S. oil company by market value after ExxonMobil also said in an interim update released after the market close that earnings at its exploration-and-production segment are expected to be comparable with the third quarter.

The view from the California-based oil giant signals that while fourth-quarter results for the major oil companies will be helped by climbing oil prices, earnings won't be immune from a shortfall in their refining operations and the weakness in the North American gas market, Barclays Capital said in a research note.

Chevron's refining operations were hit in the fourth quarter by the same oil market conditions that caused competitors Tesoro and Marathon Petroleum to issue surprise announcements that they would post losses for the period. U.S. oil prices rose steadily during the quarter while fuel demand has been flat, a combination that has eroded refining margins.

Chevron said Wednesday its refining, marketing and chemical operations, known in the energy industry as the downstream segment, is expected to be "near break-even." The company said its Gulf Coast refining margin fell "substantially." Its refined products output during the quarter fell by 180,000 barrels a day in the U.S. while it performed maintenance at its refinery in Richmond, Calif., and by 90,000 barrels a day in the U.K. as it completed the sale of its refinery in Pembroke, Wales, to Valero Energy.

The company expects its fourth-quarter results to include a foreign-exchange loss, versus a gain of nearly $450 million in the third quarter.

Chevron's U.S. production in the first two months of the quarter reached about 660,000 barrels of oil equivalent a day, down 5.4% from a year ago and 0.3% below the third quarter. International output reached 1.979 million barrels of oil equivalent a day, down 5.2% on the year but up 2.2% from the third quarter.

During the first two months of the fourth quarter, Chevron, a component of the Dow Jones Industrial Average, fetched, on average, $106.41 a barrel for crude oil from its U.S. fields, up 34% from a year earlier and up 5.1% compared with the full third quarter. Realized U.S. natural-gas prices averaged $3.71 per thousand cubic feet, up 1.6% from a year ago but 10.4% below the third quarter.

Chevron is slated to report full fourth-quarter results Jan. 27. The company expects to report $250 million to $350 million in after-tax net charges in the fourth quarter.

Copyright (c) 2012 Dow Jones & Company, Inc.


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