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ChevronTexaco Profit Skyrockets

The California oil giant's net income for the first quarter exceeds that for all of 2002.

May 03, 2003|Elizabeth Douglass and Nancy Rivera Brooks | Times Staff Writers

ChevronTexaco Corp. said Friday that its profit more than doubled in the first quarter, helped by soaring oil prices that sent retail gasoline prices to record levels in California.

The San Ramon, Calif.-based company is the latest in a string of major oil producers and refiners to report sharply higher earnings for the first quarter, when the war in Iraq and a petroleum workers strike in Venezuela unsettled markets and pumped up crude prices.

ChevronTexaco posted net income of $1.9 billion, or $1.81 a share -- an amount that surpassed its profit for all of last year. It earned $725 million, or 68 cents a share, in the first quarter of 2002. Sales for the latest quarter totaled $31 billion, up 46% from $21.2 billion a year earlier.

The company's share price rose almost 4% on the news, gaining $2.35 to close at $65.35 in Friday trading on the New York Stock Exchange.

"This is definitely, if not a grand slam, a two-run homer," said Fadel Gheit, an analyst at Fahnestock & Co. who rates the company a "buy" and owns its shares. "Investors are going to say, 'What can you do for an encore?' "

Consumer advocates were quick to point to the quarterly profit as proof that ChevronTexaco, along with rivals, benefited at the expense of motorists.

"These companies were profiting at the misery of California consumers," said Michael Shames, executive director of the Utility Consumers' Action Network, a San Diego-based consumer group. "While it may not be wartime profiteering, it's really, really close."

He noted that high fuel prices also boosted the fortunes of Exxon Mobil Corp., BP, ConocoPhillips and Royal Dutch/Shell Group in the quarter.

Last month, ChevronTexaco's headquarters was the site of an antiwar protest that drew an estimated 400 people.

About 50 protesters were arrested as they blocked the company's entrance.

In California, where the price for self-serve regular gasoline peaked at $2.145 a gallon in March, ChevronTexaco operates two of the largest refineries and is the No. 2 retail seller of gasoline, behind BP subsidiary Arco. Retail prices now average less than $2.

ChevronTexaco's U.S. refining and marketing segment turned a profit of $70 million in the quarter, a reversal from a loss of $154 million in the first quarter of last year. The company attributed the turnaround to "stronger industry margins late in the quarter, primarily for the company's West Coast operations."

Analyst Gheit said ChevronTexaco's "West Coast refining margin was $20.30 a barrel, which is basically 48 cents per gallon. And that's almost four times the national average and also much higher than the historical average for California.

"It was just an extremely, extremely strong quarter in California."

But both Gheit and ChevronTexaco spokesman Fred Gorell pointed out that most of the profit did not come directly from retail gasoline sales.

More than 90% of ChevronTexaco's earnings came from its oil exploration and production segment, whose products are typically sold through wholesale markets, where profit rose 73% to $1.97 billion because of the higher worldwide prices for oil and natural gas.

Gorell also rejected the notion that ChevronTexaco refineries were collecting unseemly profit.

"That's the first positive earnings quarter in a year" for refining and retail operations, he said.

"The business of making and selling motor gas continues to be a very tough, very competitive business with, over time, thin profit margins."

During the quarter, the oil company took net charges totaling $196 million, or 18 cents a share, for expenses related to an accounting change. Before that charge, ChevronTexaco's first-quarter income was $2.1 billion, or $1.99 a share.

On average, analysts had estimated that the company would earn $1.81, according to a survey by Thomson First Call.

"We knew it was going to be a strong quarter just by virtue of the high oil and [natural] gas prices," said Sean Sexton, oil and gas analyst at Fitch Ratings.

"It just goes to show you that when everything clicks for a big oil company, they can make a lot of money ... $2 billion in a quarter."

However, ChevronTexaco's production of oil and natural gas, a key indicator, was down 6% in the quarter. That prompted Gheit to add a note of caution about ChevronTexaco's future results.

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