Chevron Posts Solid Upsurge in Profit

Riding a gusher of strong oil and natural gas prices, ChevronTexaco Corp. said fourth-quarter profit nearly doubled despite falling production.

The nation’s second-largest oil company reported net income of $1.7 billion, or $1.63 a share, for the three months ended Dec. 31, up from $904 million, or 85 cents, in the same quarter of 2002. Sales for the quarter rose to $30 billion, a 12.6% increase.

Analysts credited the improvement mainly to high commodity prices, which allowed ChevronTexaco to cash in on its crude oil and natural gas production, while its refineries gained from higher retail prices for gasoline and other fuels.

The San Ramon, Calif.-based company said its full-year net income was more than six times higher than in 2002, coming in at $7.2 billion, or $6.96 a share. The previous year’s earnings were hit hard by low commodity prices and costs related to Chevron’s investment in Dynegy Inc.

“I thought it was a very good quarter,” said Gene Gillespie, an analyst at Howard Weil Inc. “They have more exposure to commodity prices than the other majors do, and this quarter, it was a good thing to have.”

ChevronTexaco sold its oil in this country for an average of $27.09 a barrel in the fourth quarter, 11% above the average in the last quarter of 2002. The company sold its natural gas for an average of $4.35 per 1,000 cubic feet, up almost 23%.

Gasoline prices were also higher than normal for much of the year, especially in California, where ChevronTexaco operates two large refineries. After subtracting for the cost of raw crude oil, ChevronTexaco’s West Coast refineries took in $18.17 per barrel of gasoline and other refined products, up $2.81, or 18%, from the year-earlier quarter. The company’s nationwide gasoline sales, however, declined nearly 4% in the period.

Daily net production of oil and natural gas fell 2.6% for the quarter and 3.9% for the year, declines caused partly by the sale of still-producing fields. At year-end, ChevronTexaco had a net gain in “proved” oil and gas reserves -- resources that are primed for production and sale.

The company’s shares slid amid a general decrease in oil stocks Friday, closing at $86.35, down 96 cents, on the New York Stock Exchange.

ChevronTexaco’s fourth-quarter net income included $189 million in gains from tax adjustments and asset sales as well $100 million in charges from restructuring costs and asset impairment at Dynegy. Subtracting special items and foreign currency losses, ChevronTexaco earned $1.55 a share, below the average analyst expectation of $1.59 a share, according to Thomson First Call.

An obviously pleased Chairman and Chief Executive Dave O’Reilly said the quarter’s results “capped an excellent year for the company.” A year earlier, he faced analysts with 2002 results that he labeled “completely unsatisfactory.”

Since then, O’Reilly has pledged to sell about $2 billion in assets annually for the next few years. Chevron’s sales have included mature oil and gas fields in the United States, certain overseas projects, the company’s El Paso refinery and hundreds of company-owned U.S. service stations.

O’Reilly told analysts Friday to expect more of the same in 2004.