Chevron 2Q profit soars on oil prices, shares dip

Propelled by record crude prices, Chevron's second-quarter profit rose 11 percent to a record $5.98 billion, despite losing money on the refining side of the business.

But results for the second-largest U.S. oil company missed Wall Street forecasts and shares fell slightly in early afternoon trading.

The San Ramon, Calif.-based company said Friday its net income for the three months ended June 30 amounted to $2.90 per share, versus income of $5.38 billion, or $2.52 per share, a year earlier.

Revenue rose significantly to $82.9 billion from $56.1 billion a year ago.

Analysts surveyed by Thomson Financial expected profit of $3.03 per share on revenue of $92.41 billion.

Like its competitors, Chevron made the bulk of its money at its exploration and production arm, also known as the upstream, where income nearly doubled from a year ago to $7.25 billion. The company benefited from oil prices in the quarter that were nearly double levels from a year ago. Higher natural gas prices helped too.

Chevron said the average sales price for crude and natural gas liquids was $109 a barrel in the quarter, up from $57 a barrel in the year-earlier period.

Soaring commodity prices provided a similar second-quarter lift to four of Chevron's biggest rivals - Exxon Mobil Corp., ConocoPhillips, BP PLC and Royal Dutch Shell PLC - all of whom posted record quarterly profits.

But Chevron's division that refines and sells gasoline actually swung to a loss of $734 million in the quarter after earning $1.3 billion a year ago. The culprit: those same crude prices that lifted upstream earnings.

Like its peers, Chevron doesn't produce enough oil on its own to feed its refineries, forcing it to buy some on the open market. And it wasn't able to raise the price of gasoline and other products fast enough to recover its own rising costs for oil.

Chevron said planned downtime at some refineries also contributed to the loss.

"The higher cost of crude oil used in the refining process was not fully recovered in the price of gasoline and other refined products," said Chairman and CEO Dave O'Reilly. "As a result, our downstream operations incurred a loss in the second quarter, with most of the loss taking place in the United States."

Chevron said overall production in the quarter fell about 3 percent from a year ago, hurt in part by production-sharing contracts. However, on a conference call with analysts Friday, company officials said project startups will increase production in the second half of 2008 and the company should meet or exceed its full-year volume target.

For the first six months of the year, Chevron reported net income of $11.14 billion, or $5.38 per share, compared with $10.09 billion, or $4.70 a share, for the first half of 2007.

Revenue climbed to $148.93 billion from $104.32 billion.

Chevron shares slipped 43 cents in afternoon trading to $84.13. They've traded in a range of $76.40 to $104.63 in the past year.