Chevron profit declines as crude prices fall with production

Chevron Corp., the world’s second- largest energy company by market value, said net income fell for a second straight quarter as crude oil prices declined and output from the company’s wells dropped.

Second-quarter profit was $5.37 billion, or $2.77 a share, compared with $7.21 billion, or $3.66, a year earlier, San Ramon, California-based Chevron said in a statement today. The per-share result was 19 cents below the $2.96 average estimate of 21 analysts, excluding one-time gains and losses, in a Bloomberg survey.

Brent crude futures, a global benchmark, lost 5% of their value during the quarter compared with a year earlier as worldwide demand for petroleum-based fuels failed to keep pace with production growth. Refining margins in the U.S., the world’s largest motor-fuels market, narrowed as lower gasoline use reduced retail prices by 3.6% to a quarterly average of $3.601 a gallon, based on Energy Department figures.

Chevron Chairman and Chief Executive Officer John S. Watson pledged in March to raise oil and gas output by one-fifth to the equivalent of 3.3 million barrels a day by the end of 2017 through mega-projects such as the $47 billion (A$52 billion) Gorgon gas-export development in Australia. Last month, Watson signed a $1.24 billion agreement with Argentina’s state- controlled YPF SA to explore a shale formation in the Latin American nation for oil and gas.

Global Production

Chevron estimated in March that its global output this year will rise 1.5% to an average of 2.65 million barrels a day, assuming crude prices around $112 a barrel.

The statement was released before the opening of regular U.S. stock trading. Chevron rose 0.4% to $126.44 yesterday in New York.

Chevron has been the best-performer among the largest international oil producers this year with a 17% increase in its share price through yesterday. Exxon Mobil Corp., the biggest oil company, has risen 7.1%, followed by Royal Dutch Shell Plc’s 0.5% gain, Total SA’s 3.8% rise and BP Plc’s 7.9% increase. PetroChina Co. Ltd. has fallen 17%.

Brent crude averaged $103.35 a barrel during the quarter, compared with $108.76 a year earlier, according to data compiled by Bloomberg. Prices fell as worldwide oil production rose 0.6% at a time when demand increased by 0.1%. Consumption increases in expanding economies such as China and India were more than offset by demand declines in the U.S., western Europe and Japan, according to figures published by the International Energy Agency in Paris.

Gas Prices

U.S. natural gas prices climbed 71% to an average of $4.018 per million British thermal units during the April-to- June period from a year earlier, according to data compiled by Bloomberg.

Chevron has been raising gas production in the Marcellus Shale formation in the eastern U.S. since its 2011 acquisition of Atlas Energy Inc. The transaction included a previously signed joint venture between Atlas and Reliance Industries Ltd. that committed the Indian company to cover most of the drilling costs in exchange for a stake in each well.

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