Chevron 3Q profit more than doubles
By CHRIS KAHN AP Energy Writer
Posted: 10/28/2011 05:53:49 AM PDT
Updated: 10/28/2011 01:24:42 PM PDT
Click photo to enlarge
In this Oct. 27, 2011 photo, the signs for two Chevron gas stations... ((AP Photo/Wilfredo Lee))
Chevron Corp.'s quarterly profit more than doubled as a jump in petroleum prices made up for declining production.
Chevron, the second-largest U.S. oil company after Exxon Mobil, said Friday that it sold oil and natural gas at sharply higher prices in the third quarter. The price of gasoline, diesel, jet fuel and other fuels also increased from a year ago, boosting profits at its refineries.
The results mirror those of other oil giants that reported earlier this week. Despite lower oil production, Exxon Mobil Corp.'s net income rose 41 percent and profits doubled for BP and Royal Dutch Shell.
For Chevron, oil and natural gas production suffered from July to September because of pipeline troubles in Thailand, tropical storms in the Gulf of Mexico and equipment issues in the United Kingdom and Australia.
"Third quarter 2011 was an obvious lull in production for us," Chief Financial Officer Patricia Yarrington said in a conference call with investors. "We do expect to see notably increased production during the fourth quarter."
Chevron, based in San Ramon, Calif., reported net income of $7.83 billion, or $3.92 per share, for the quarter. That compared with $3.77 billion, or $1.87 per share, a year earlier. Revenue rose 26 percent to $61.3 billion.
Results beat expectations of $3.47 per share but fell short of revenue estimates of $70.4 billion, according to FactSet.
Shares rose 38 cents to close at $109.64.
Chevron operates a global network of oil and gas fields from Argentina to Azerbaijan. Those operations boosted profits 74 percent in the July-to-September quarter, even though production declined 5 percent overall. Income rose as refineries paid more for every barrel that Chevron pumped from the ground. The company sold oil for $97 per barrel in the U.S., up 41 percent from last year. Internationally, it was able to sell oil at $103 per barrel, up 47 percent.
Similarly, higher prices for gasoline, diesel, jet fuel and other petroleum products boosted profits at the company's refineries. Chevron's downstream business—which includes refineries and thousands of gasoline stations with its striped red-and-blue logo—used relatively cheap varieties of crude to make higher-priced fuel.
Higher fuel prices more than made up for lower production in the U.S. and overseas. Chevron's downstream business reported a more than threefold jump in profit for the quarter.
Chevron's profit doubles and revenue jumps, but oil production slips
By George Avalos
Contra Costa Times
Posted: 10/28/2011 07:02:57 AM PDT
Updated: 10/28/2011 06:08:47 PM PDT
Chevron's profit more than doubled in the third quarter, powered by rising prices for crude oil, the energy giant reported Friday, topping analysts' estimates.
San Ramon-based Chevron earned $7.83 billion, up 108 percent from the $3.77 billion it earned in the year-ago quarter. Revenue jumped 29.6 percent and totaled $64.43 billion in the July-September quarter.
Chevron has launched a big push to develop oil and natural gas projects in other countries, and that effort has been a major propellant behind the company's geyser of profits. Chevron CEO John Watson pointed to the company's liquefied natural gas projects in the waters off Australia.
"The recent decision to develop the Wheatstone LNG project represents a major milestone in the company's efforts to commercialize our significant natural gas resource base in Australia," Watson said. "The Wheatstone and Gorgon LNG projects are expected to provide substantial new energy supplies" as demand swells in Asia.
Profit topped Wall Street's predictions. The company earned $3.92 a share. A survey of analysts projected $3.47 a share. Revenue, though, fell short of the expectations of $70.4 billion.
"Chevron is very well positioned," said Philip Weiss, an analyst with investment firm Argus Research. "They have increased their dividend twice this year. That says the business is running well. The dividend also says they have confidence in the future."
The company's shares rose 0.6 percent, or 67 cents, to finish at $109.64 a share Friday. Chevron's stock outperformed its oil industry peer group, which rose an average of 0.3 percent.
"Chevron's profit per barrel is the highest among its peer companies," said Pavel Molchanov, an analyst with investment firm Raymond James. "They have been at the top of that peer group for two years."
Rising oil prices fueled profits for Chevron's upstream operations -- exploration, development and production.
Asset sales and improved margins at company refineries boosted the company's downstream units -- refining, retail and transportation.
Profit from the upstream operations totaled $6.2 billion, up 74 percent from the year before. Downstream profit totaled $1.99 billion, more than triple, or a 252 percent increase from the year-ago quarter.
The company's refinery operations in the United States appear to be faring better. U.S. downstream profit doubled -- surging 102 percent -- for a total of $704 million. The company said margins improved for sales of refined products such as gasoline.
Downstream results in the U.S. also benefitted from lower operating expenses, Chevron said. The company has been trimming its staff in locations such as San Ramon, Concord, Richmond and Houston.
Some worrisome trends have emerged lately for Chevron, however.
Chevron's energy production slipped in the quarter. Chevron produced 2.6 million barrels a day in the third quarter, down 5 percent from a year ago.
In recent days, Exxon Mobil, Royal Dutch Shell and BP said quarterly profits surged even though they're producing less oil. While oil companies, including Chevron, are spending billions to develop new oil and natural gas fields, it could take years or even decades before the fields produce energy and revenue.
The company will intensify its efforts to develop new projects, Chevron executives told analysts during a conference call Friday. For 2011, Chevron budgeted $26 billion in capital expenditures. That represents the company's highest level ever.
"I'm not in a position just yet to offer a firm capital expenditure budget, but you should expect a noticeable increase from our current spending levels," said Patricia Yarrington, Chevron's chief financial officer.
Contact George Avalos at 925-977-8477. Follow him at twitter.com/george_avalos.
Chevron blames Richmond regulations, calls the county inept, as property tax hearing opens
Monday was the first day of the hearing on Chevron's refinery property taxes. The session was closed to the public whenever the refinery's income was discussed. (photo by: Rachel Waldholz)
By: Rachel Waldholz | October 25, 2011 – 12:20 pm
The last time Chevron and Contra Costa County clashed over property taxes, the hearing took two years.
Assessment Board of Appeals members Clark Wallace, Arthur Walenta and James Giacoma. (photo by: Rachel Waldholz)
The question then was how much the refinery owed in taxes from 2004-2006. When the property tax appeals board finally issued a ruling — in September 2009, 22 months after opening statements – the opinion cited a law, Rule 474, which both sides agree wasn’t even on the books in 2004-2006. The case landed in court, where it remains.
And now, as of Monday, here we are again. Same parties. Same issues. What’s new are the dates: this time Chevron and the County are arguing over taxes owed by the refinery from 2007-2009.
Chevron says the refinery was worth about $1.8 billion in 2007, and $1.15 billion in 2009. The county says it was more like $3.4 billion and $3.1 billion. If the board rules with Chevron, the county – and its cities, school, water and fire districts — would have to refund nearly $60 million, according to county assessor Gus Kramer.
How did the two sides get so far apart? In a hearing Monday before the Assessment Appeals Board, Chevron called the assessment arbitrary and unprofessional, and argued that taxes, regulations and the bad economy had reduced the refinery’s value. The county, for its part, said that the refinery has been remarkably profitable, increasing its value and justifying the higher assessment.
Lawyers for the county Robin Thornton, John Makin and Kevin Lally. (photo by: Rachel Waldholz)
The appeals board met in the Board of Supervisors’ chambers in Martinez, where a minimal audience had divided itself by loyalty: on the left side of the aisle, Chevron’s entourage of lawyers, staff and witnesses, about a dozen strong, in dark suits. On the right, a group of stalwarts from the Richmond Progressive Alliance, including Richmond Mayor Gayle McLaughlin, armed with signs. RPA member Eduardo Martinez wielded a two-sided placard: when the county spoke, it read, “We Agree.” When Chevron spoke, it read, “Despicable, Disgusting, Obscene.”
Up on the dais sat the appeals board: chair Arthur Walenta — who Chevron tried to remove from the board this spring — Clark Wallace, and James Giacoma. Wallace also served on the board in the 2004-2006 appeal.
This time through the appeals process, everyone is hoping to be done by Christmas (the official goal is five weeks: Dec. 2). The morning events, though, didn’t seem to indicate anyone was in a particular hurry.
An hour was spent deciding who would go first, which, to be fair, actually matters: typically, the party that bears the burden of proof must present their case first, while the party presumed to be correct then responds. Chevron asked that the presumption be removed from the Assessor’s office, shifting the burden of proof.
“The presumption is given to someone who is presumed to have done their job correctly,” said Chevron lawyer Lawrence Hoenig, of the San Francisco firm Pillsbury Winthrop Shaw Pittman. “That’s not the case here.”
The board demurred; Chevron went first.
This was followed by an invitation to the board to visit the refinery, extended and politely declined (Frankly, I’d like to,” Wallace said, “But you have so many restrictions on it, I feel like my mind would be messed up even more.”) There was a tussle over whether three subpoenas to members of the Assessors’ office had in fact been served. Chevron expressed its desire that there be restrictions on audience signs. The board expressed its disinterest in meeting that desire.
Margaret Jordan and Mike Parker, of the Richmond Progressive Alliance, attended the hearing. (photo by: Rachel Waldholz)
Then there was the issue of confidentiality. Hoenig asked that the hearing protect one number in particular, a number of intense interest to many in the room: how much money Chevron’s Richmond refinery actually makes. He requested that the board clear out the public if the number was discussed.
“It’s impossible to do an opening statement without discussing how much money this refinery is making,” said the county’s lawyer Kevin Lally, of the firm Greenan, Peffer, Sallander and Lally. But he agreed to close the courtroom when the number was mentioned.
“I will refer to it as the number that shall not be named,” Lally said.
Accordingly, each time the talk veered too close to specifics, the members of the audience who were neither lawyers nor witnesses trooped out to sit on folding chairs in the hall, where they joined portraits of the five county supervisors and a banner advertising Creek and Channel Safety Awareness Month (“Stay Out! Stay Alive!”).
At 11:33 a.m., Hoenig announced that he was about ready to give his opening statement.
Hoenig argued that the county had assigned the assessed values arbitrarily, without following state standards for appraisal or offering any evidence. He also argued that the financial crisis reduced the refinery’s value in 2007-2009, along with new federal and state environmental regulations like the Obama administration’s increased fuel standards for cars and California’s climate change legislation, which Hoenig said hit the fuel industry particularly hard.
And, Hoenig said, “This refinery is located in Richmond. There are difficulties in Richmond.”
Half a dozen representatives of those “difficulties” were sitting in the audience, as Hoenig suggested when he cited the burden of Richmond’s utility user’s tax, business license fee and Measure T, all three priorities of the RPA (measure T has since been overturned). City taxes, regulations and permitting procedures put the refinery at a disadvantage against even local competitors, Hoenig said: “There are four refineries in this county. Only one is located in Richmond.”
The city representatives saw it differently. “I just thought it was a blatant example of big money interest punishing the community in which it is operating,” said mayoral aide Marilyn Langlois, when the Board recessed for lunch.
In the afternoon, it was Lally’s turn. At this point, five hours in, Walenta declared suit jackets optional, to sighs of relief and general disrobing.
Lally argued that Chevron makes a lot of money from the refinery, and that makes the refinery incredibly valuable.
Chevron attorney Lawrence Hoenig listens as county attorney Kevin Lally gives his opening statement. (photo by: Rachel Waldholz)
“Since I’m not allowed to use the number, it is a refinery that spins off buckets of money,” Lally said — “That’s confidential,” broke in board member Wallace, to chuckles — “And these buckets are pretty big,” Lally said.
And at that point, the audience was booted again, back to the hallway. Supervisors. Folding chairs. Channel safety.
Before she left, Mayor McLaughlin declared herself bewildered by Chevron’s appeal. “The overall situation here is we know that Chevron has record profits and can clearly afford to pay the assessed taxes,” McLaughlin said. “No one is going to lose their jobs if Chevron loses. If the county loses … people will be laid off. Residents will suffer.”
When she recently toured the refinery, McLaughlin said, “I said, ‘I ask you not to bring forward this appeal. I ask you to withdraw it.’”
Chevron spokesperson Dean O’Hair said the county’s assessment jumped from $1.9 billion in 2003 to $3.5 billion in 2004, and that the refinery just wanted consistency. “We want to have an understanding of the process going forward so we have some stability and predictability in how the refinery is valued,” O’Hair said.
It should be of interest to the Richmond community that the refinery be treated competitively, so that it can continue to be an economic engine in the city of Richmond,” O’Hair said. “The other refineries are not being treated as this refinery is.”
Each side will have 60 hours to present its case and call witnesses. If the two sides cannot reach agreement on how the refinery is assessed, the whole show could repeat itself every three years until they do (the board limits hearings to three years at a time). Chevron has already appealed its 2010 taxes and is considering an appeal of its 2011 taxes.
Only five more weeks to go?