SAN FRANCISCO, July 10 — Chevron Corp reported a sharp decline in second-quarter US refining margins and said the benefits of higher oil prices were largely offset by a weaker dollar, and its shares fell 1.6 per cent.
The second-largest US oil company said yesterday the decline in second-quarter US refining margins more than offset an increase in marketing margins, while margins were mixed outside its home country.
Refining margins have been squeezed by higher crude prices, which lift input costs, and weak demand due to the recession.
"Downstream results are projected to be significantly lower than the first quarter," Chevron said in its interim update.
Chevron said US oil-equivalent production in April and May was 682,000 barrels per day (bpd), up from 671,000 in the first quarter, while international output was 1.979 million bpd, down by 13,000 bpd from the previous quarter.
Chevron is targeting overall average output of 2.63 million bpd for 2009. In late May, about 100,000 bpd of production in Nigeria was shut in due to violence. But a series of projects are also starting up this year, including its Frade project off the coast of Brazil.
Benchmark US crude oil prices averaged just below US$60 per barrel in the second quarter, up from US$43 in the first quarter but less than half the average in the same quarter a year ago.
While that helped upstream earnings, the dollar declined in the second quarter by 6 per cent against a basket of currencies, meaning any products sold in foreign currency translated into weaker earnings.
Chevron expected after-tax charges for corporate and other activities to be below the normal guidance of US$250 million to US$350 million, with variation due to foreign currency effects and potential accruals from pension settlements and taxes.
The San Ramon, California-based company is due to report second-quarter results on July 31.
Prior to the update, analysts had been expecting net profit before items of US$2.46 billion, or US$1.26 a share, on revenue of US$20 billion, according to averages on Reuters Estimates.
That's up from the first quarter's profit of 72 cents per share. But in the second quarter last year — which ended right before oil prices peaked — Chevron earned US$2.90 a share on revenue of nearly US$83 billion.
Rival ConocoPhillips said this week high inventories and weak fuel margins would hurt its second-quarter refining results, while oil and natural gas production was expected to drop from the prior quarter.
Shares of Chevron were down more than 1.6 per cent at US$62.03 in extended trading yesterday.
The stock is now down 16 per cent in 2009, versus just an 8 per cent drop for the Chicago Board Options Exchange index of oil stocks, as companies with refining operations have been hit harder than production-focused rivals. — Reuters
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