Chevron joins oil majors hit by falling refinery profits

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chevron-logo-5Chevron, the US oil group, reported earnings below analysts’ expectations after being hit by falling profits at its refineries in the third quarter.
Earnings per share were down 4 per cent at $2.57, compared with analysts’ average expectations of about $2.70.
Chevron’s shares fell 1.7 per cent in early trading to $117.97, in response.
John Watson, Chevron’s chief executive, said the company was making “good progress” on the large projects that are expected to boost its production over the next few years, including the Gorgon and Wheatstone LNG projects in Australia, the Jack/St. Malo and Big Foot oilfields in the deep water of the Gulf of Mexico that are scheduled to start up at the end of next year, and its “tight oil” developments onshore in the US.
The company, the world’s second-largest listed oil group by market capitalisation, also said it had acquired new opportunities for longer-term production growth, including oilfields in the Kurdistan region of northern Iraq and the Permian basion of West Texas, and a plan for a potential liquefied natural gas export plant at Kitimat on the west coast of Canada.
Chevron’s results were the last in the latest round of reports from the large western oil companies, and conformed to the general pattern of rising costs and a slump in the profitability of refining.
Large volumes of new refining capacity coming on stream in China, the Middle East and India this year, outpacing the growth in global fuel demand, have put pressure on refining margins worldwide.
Earnings at Chevron’s downstream operations, including refining and its chemicals joint venture with Phillips 66, fell 45 per cent to $380m.
Like ExxonMobil, the largest listed oil group by market value, but unlike its European rivals BP and Royal Dutch Shell, Chevron raised its oil and gas production in the third quarter, thanks to projects building up to full production in the US, Angola and Nigeria. It reported a 2.7 per cent increase in output compared to the equivalent period a year ago at 2.59m barrels of oil equivalent per day.
However, earnings from the upstream oil and gas production division still fell, dropping 1 per cent to $5.02bn, mainly because of the absence of a $600m gain recorded in the third quarter of 2012 for the sale of a 10 per cent stake in Wheatstone to a consortium including Tepco, the Japanese utility.
Chevron has been continuing with its heavy capital spending programme, with capital and exploration expenditure up 27 per cent in the first nine months of the year at $28.9bn.
Exxon, despite being a much larger company, is spending only slightly more than Chevron on capital investment and exploration.
It’s capital spending so far this year is $32.6bn – or 13 per cent more than Chevron’s even though its market capitalisation is 73 per cent higher – reported http://www.ft.com.

By Ed Crooks in New York

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