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Chevron Posts 49% Increase in Profit

A consumer group accuses the company of profiteering after it reports earnings of $4billion, boosted by oil extraction and refining.

April 29, 2006|Elizabeth Douglass | Times Staff Writer

Chevron Corp. joined the parade of oil companies reporting king-size profits Friday, announcing that high crude prices helped boost first-quarter earnings 49% to $4 billion.

The company's results came on the heels of a series of stunning profit reports from giant Exxon Mobil Corp. and as critics from California to Washington ratcheted up accusations that the oil companies were piling up cash at the expense of consumers who were paying more than $3 for a gallon of gasoline.

Together, the nation's top three oil companies -- Exxon Mobil, Chevron and ConocoPhillips -- reported profit of $15.7 billion in the first quarter, a nearly 17% increase from the year-earlier quarter.

The Foundation for Taxpayer and Consumer Rights on Friday accused Chevron of profiteering. The company's latest financial report is "proof that retail gasoline prices are rising far faster than the cost of production, despite all the oil company excuses about the price of crude oil," the Santa Monica consumer activist group said.

Chevron on Friday barely acknowledged the furor surrounding industry profits. Chief Executive Dave O'Reilly said in a statement that the San Ramon, Calif., company "is in an excellent position to continue adding value for our stockholders and helping to satisfy the energy needs of the world economies." A Chevron spokesman didn't return a call seeking comment on the price-gouging accusations.

The American Petroleum Institute, a trade group, has said that oil prices are being driven up by a tight worldwide supply of oil and that gasoline prices reflect U.S. market conditions.

Chevron's first-quarter net income was equal to $1.80 a share, up from $2.7 billion, or $1.28 a share. The results, which included big increases in profits from oil extraction and refining, surpassed Wall Street expectations of $1.78 a share, according to Thomson Financial.

Revenue for the quarter totaled $54 billion, up 32% from $42 billion a year earlier. Chevron increased its capital expenditures for exploration and refining projects by 80% to $3 billion in the first period.

"It was a pretty vanilla quarter," said Mark Gilman, an oil analyst at independent researcher Benchmark Co. But because Chevron's earnings have fallen short of analysts' expectations in four of the last six quarters, Gilman said, "something that's plain vanilla is kind of a backward plus."

Chevron shares rose $1.04, or 1.7%, to $61.02. The futures price of crude oil -- which fell for four straight days this week after surpassing $75 a barrel the week before -- closed up 91 cents at $71.88 for a barrel of U.S. benchmark crude.

The largest share of Chevron's profit increase came from its exploration and production business, which posted income of $3.46 billion for the quarter, up 45% from the combined effect of higher output of oil and natural gas and higher sale prices for those products.

Chevron produced the equivalent of 2.6 million barrels of oil per day for the quarter, up about 10% from the same period last year. Last quarter's output was boosted by Chevron's August acquisition of El Segundo-based Unocal Corp.

The oil company's worldwide refining and marketing business booked income of $580 million, a 42% jump from the first quarter of 2005. The largest increase came in Chevron's U.S. operations, which include more than 9,000 Chevron stations and five refineries in the Southwest. Income from Chevron's domestic refining and marketing business nearly quadrupled in the quarter, rising to $210 million from $58 million in last year's first quarter. Critics in California seized on that increase -- equal to 262% -- because Chevron is one of the state's largest gasoline refiners and retailers.

But Chevron said its West Coast refining margin, which subtracts the cost of crude oil but not other expenses, averaged 43.6 cents a gallon for the first quarter, down from 44 cents a gallon a year earlier.

Judy Dugan of the Foundation for Taxpayer and Consumer Rights was not assuaged by the year-over-year decline in refining margins. "Motorists should remember that amazing figure -- 260% -- every time they stick a Chevron pump handle into the gas tank," she said.

In California, the average gas price continued to march sharply upward Friday, rising 2.7 cents overnight to $3.206 for a gallon of self-serve regular, according to AAA's daily retail survey. Nationwide, the average pump price rose less than a penny to $2.929 a gallon.

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