Chevron posts 7% drop in profits, but refineries reflect strong margins

As oil prices fell, Chevron Corp.’s profits dropped by 7% in the second quarter. But the second largest oil company in the U.S. remains unfazed; although output would fall short this year, the blow to the company’s earnings will be cushioned by its refineries’ strong margins. Chevron and rival ExxonMobil Corp. both faced weak prices for U.S. natural gas because of the glut of shale production, which has been regarded by U.S. companies as a double-edged sword. Chevron however, relies less on North American gas, which accounts for only 5% of its reserves, compared to Exxon’s 18%. The company’s second quarter oil and gas production fell to 2.62 million barrels of oil equivalent per day from 2.69 million barrels per day (bpd) in 2011. Chevron’s Vice Chairman George Kirkland attributed the decline of profits to three factors: a shutdown of Chevron’s Frade field in Brazil after a spill; third-quarter maintenance work at its 300,000-bpd Tengizchevroil plant in Kazakhstan; and a delay in the start-up of the US$10 billion Angola LNG project. Kirkland said the first shipment of liquefied natural gas is expected to arrive in September from Angola LNG; the first exports were expected to arrive in June. Chevron owns a 36.4 % stake in Angola LNG. Despite a 50% drop in the average price for Chevron’s U.S. natural gas, the company’s shares hit a four-month high in late July. (July 27, 2012)