Chevron Profit Doubles After Oil Tops $147 a Barrel

By Joe Carroll

Oct. 31 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, said third-quarter profit doubled after crude surged to a record above $147 a barrel.

Net income climbed to $7.89 billion, or $3.85 a share, from $3.72 billion, or $1.75, a year earlier, San Ramon, California- based Chevron said today in a statement. Per-share profit excluding such items as divestiture gains and damage from hurricanes in the Gulf of Mexico was $3.94, 67 cents higher than the average of 12 analyst estimates compiled by Bloomberg.

Oil futures in New York averaged more than $118 a barrel, up 57 percent from a year earlier, the biggest third-quarter increase since the contracts began trading in 1983. The world's four largest investor-owned oil companies, which netted $426 million a day in the latest quarter, have seen crude drop $80 a barrel from the record set in July.

``The fourth quarter does not look pretty at all,'' said Justin Perucki, an analyst at Morningstar Investment Services Inc. in Chicago who rates Chevron shares ``buy'' and doesn't own any. ``It's not looking very positive, given the weak economic outlook.''

Worldwide demand for petroleum-based fuels such as gasoline and jet fuel will grow this year at the slowest pace since 1993, the International Energy Agency said in an Oct. 10 report. The Paris-based group pegged 2008 demand growth at 0.5 percent, one- fourth the average annual rate of the past five years.

Revenue Rises

Chevron's third-quarter revenue jumped 42 percent to $76.2 billion. Profit from oil and natural-gas sales climbed 80 percent to $6.18 billion, even as production declined for an eighth straight quarter. Refining earnings surged almost fivefold to $1.83 billion as profit margins widened and the company's largest plant returned to full output after repairs.

Chevron rose 42 cents to $74.60 in New York Stock Exchange composite trading. The shares had fallen 21 percent this year before today.

Chevron expects to pump 2.62 million barrels of oil equivalent a day in the current quarter, said George Kirkland, executive vice president for exploration and production. That would be up 0.3 percent from last year's fourth quarter and would mark the company's first increase since 2006.

The $2.8 billion Frade project off the coast of Brazil will start pumping oil in the second quarter of 2009, rather than in March as previously estimated, Kirkland told investors and analysts on a conference call.

Spending Outlook

Capital spending probably will be about the same in 2009 as this year's $22.9 billion, Kirkland said.

Irving, Texas-based Exxon Mobil Corp., the world's largest oil company, reported yesterday that its third-quarter profit rose 58 percent to $14.8 billion. Europe's Royal Dutch Shell Plc posted a 22 percent gain to $8.45 billion.

Both companies exceeded analyst earnings estimates, as did London-based BP Plc and U.S. producers Marathon Oil Corp. and Occidental Petroleum Corp. when they reported profit increases this week. ConocoPhillips, the No. 3 U.S. oil company, posted a 41 percent gain in net income to $5.19 billion last week.

Chevron's petroleum production dropped 5.7 percent to the equivalent of 2.44 million barrels of oil a day, the lowest since the first quarter of 2005.

Gustav and Ike

Output fell partly because of contracts with oil-rich nations that inversely link the company's share of output to energy prices, said Tina Vital, an analyst at Standard & Poor's in New York. Hurricanes Gustav and Ike, which struck the U.S. in September, idled wells and toppled platforms in the Gulf of Mexico.

Chevron said Gulf storms reduced its daily production average in September by about 150,000 barrels of oil equivalent.

Declining prices may force producers to trim drilling budgets or delay some wells, said John Escario of Rydex Investments in Rockville, Maryland.

``Oil's been on a tremendous run, but it's given up more than 50 percent of its value since the summer,'' said Escario, who helps manage $13 billion at Rydex. ``In the next year it's hard to see demand picking up because we'll still be trying to put the economy back together.''

To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net.