Oil prices crashed in the second quarter, and Chevron Corp. still made $26 a barrel.
Take just about any business in which the value of a company's primary product suddenly falls and it could be time to panic. Then there is the oil patch, where billions of dollars in profits are possible even after a collapse in crude prices.
Several large oil companies have posted sharp declines in second-quarter profits this week because of lower oil and natural gas prices during the three-month period. But they still posted earnings that many other industries might envy.
Chevron said Friday that its second-quarter net income was $7.21 billion, or $3.66 a share. That was a drop of less than 7% from the $7.73 billion, or $3.85 a share, it made during the same period of 2011.
Chevron's earnings beat Wall Street expectations averaging $3.24 a share, according to analysts polled by Thomson Reuters. In trading after the release of the financial report, shares of the San Ramon, Calif., company rose 99 cents to $109.26.
Revenue in the second quarter was also down, by 9%, to $62.6 billion.
Even with a 7% drop in oil prices during the quarter, Chevron said it had a profit margin of $26 on every barrel of crude it produced, which executives expect to be an industry-leading number.
The second-biggest U.S. oil firm's per-barrel margin from the "upstream," or exploration and production end of the business, was "the highest in the industry," said Fadel Gheit, senior energy analyst for Oppenheimer & Co. "They also have the highest cash balance of anyone in the industry of more than $20 billion. This is a company that has plenty of room to maneuver."
Chevron is a refiner and seller of gasoline, and gasoline prices didn't fall nearly as far or as fast as oil prices. So, while Chevron's upstream profits were down, it's downstream was up.
"International downstream earnings were $734 million higher this quarter," Jeanette Ourada, Chevron's investor relations manager, told analysts during a conference call. "Refining and marketing margins rose, increasing earnings by $305 million."
It's what they do with some of those profits that irks industry critics.
"Chevron has already spent over $5 million on lobbying in 2012, coming in as the fourth-highest spender of the oil and gas industry," said Noreen Nielsen, energy communications director for the Center for American Progress. "Collectively, the oil and gas industry has already spent nearly $70 million on lobbying this year."
The center said Chevron should be spending less of its billions in profits on buying back shares of its own stock and more on developing renewable energy.