Chevron surprised analysts with news on Oct. 27 that the San Ramon, Calif.-based oil giant's profit rose 40% during the third quarter, boosted by high oil prices, increased production, and improved profits at refineries.
The company announced net income of $5.0 billion, or $2.29 per share, for the third quarter of 2006, compared with $3.6 billion, or $1.64 per share, in the year-ago period. The mean analyst estimate had been for $2.03 earnings per share, according to the San Francisco research firm StarMine.
After the news, the stock gained 0.6% to $67.92 per share in Friday morning trading on the New York Stock Exchange. The shares were near their 52-week high of $68.50 reached earlier in the week.
Oil prices have fallen to around $60.63 per barrel as of Oct. 27, but they remained higher during much of the third quarter, when investors had feared potential supply disruptions such as hurricanes. Average U.S. prices for crude oil and natural gas liquids in the third quarter 2006 increased by about $9 per barrel from a year ago to $62.
Meanwhile Chevron's worldwide oil-equivalent production of 2.7 million barrels per day increased 152,000 barrels per day from the third quarter 2005. Production has been rising largely because of Chevron's August 2005 acquisition of Unocal, which had healthy reserves in regions such as the Gulf of Mexico and the Caspian Sea. That means easy comparisons now to previous quarters when Chevron didn't own Unocal.
Chevron is also benefiting from the comparison to Hurricane Katrina-ravaged 2005. For example, a Chevron refinery in Pascagoula, Mississippi had been down during the year ago third quarter after hurricane damage.
As utilization and profit margins improved at refineries during the third quarter, Chevron's downstream earnings of $831 million increased $692 million from the depressed level of the 2005 quarter.
Improved profits helped offset Chevron's decline in revenue, which fell to $54.21 billion from $54.46 billion during the third quarter 2005.
"Our company's focus on operational excellence and capital investment discipline continues to be key to our success," O'Reilly said in a press release.
Chevron isn't the only one in the industry to announce healthy profits. Irving (Tex.) oil major Exxon Mobil said Oct. 26 that it had third quarter net income of $10.49 billion, up from $9.920 billion during the same period of 2005, including a $1.620 billion gain related to the restructuring of Exxon's interest in the Dutch gas transportation business. On the same day, Royal Dutch Shell reported third quarter 2006 CCS earnings of $6.9 billion, compared to some $7.2 billion a year ago, when the company had divested $1.7 billion of pipeline assets held through Gasunie NV in the Netherlands.
