UPDATE 5-Chevron profit jumps with oil, output growth slow

Fri Jul 29, 2011 1:34pm EDT

* Q2 EPS $3.85 vs Wall St view of $3.56; revenue up 30 pct

* Trims 2011 output target, sticks to long-term goals

* Sees no more big Marcellus deals, US Gulf plan on track

* Shares down 0.7 percent (Adds executive comments)

By Matt Daily and Braden Reddall

NEW YORK/SAN FRANCISCO, July 29 (Reuters) - Chevron Corp (CVX.N), the second-largest U.S. oil company, booked a 43 percent jump in quarterly profit, beating estimates as high oil prices and fat refinery margins offset weaker output.

The numbers out on Friday were the latest in a string of huge profits from the industry, which got a boost from the highest oil prices in nearly three years. Exxon Mobil Corp (XOM.N) and Royal Dutch Shell Plc (RDSa.L) also benefited from acquisitions and shifts into new projects. [ID:nL6E7IS16A]

Chevron's better-than-expected second-quarter performance was largely due to the strength of its U.S. and international refineries, according to Oppenheimer & Co analyst Fadel Gheit.

Still, the oil and gas production business yielded nearly 90 percent of Chevron's earnings. "This is the most leveraged company to oil price in the whole group," Gheit said.

Its profit rose to $7.7 billion, or $3.85 per share, from $5.4 billion, or $2.70 per share, a year earlier. Analysts had expected $3.56 a share, according to Thomson Reuters I/B/E/S. Revenue rose 30 percent to $69 billion.

Shares of Chevron were down 0.7 percent to $104.30 by midday on the New York Stock Exchange amid a broad sell-off.

OIL OUTPUT SLIPS, OUTLOOK TRIMMED

Chevron reported 2.69 million barrels per day (bpd) of oil-equivalent output, compared with 2.75 million a year-ago.

Chevron trimmed its 2011 oil and gas production forecast to 2.76 million bpd due to a slower ramp-up of its Perdido project in the Gulf of Mexico and a pipeline problem in Thailand. Chevron had targeted 2.79 million bpd, or 1 percent growth.

"The full-year production impact of these two items is about 30,000 barrels per day and they are approximately split between the two," said George Kirkland, vice chairman and executive vice president for upstream and gas.

But it stuck to its 2011-2014 average annual production growth target of 1 percent, and 4 percent to 5 percent for 2014-2017.

European benchmark Brent oil prices LCOc1 averaged $117 per barrel in the second quarter, up from $79 in the same quarter in 2010 and $11 higher than the first quarter. Chevron said in April that it switched to Brent from the U.S. benchmark when calculating production-sharing changes. [ID:nN29138122]

Higher crude prices mean Chevron must leave more production in the hands of state-owned partners. The new target still assumes oil prices of $79 per barrel, whereas with Brent at $111 per barrel Chevron sees output at 2.73 million bpd.

On Thursday, Exxon reported a 41 percent rise in quarterly profit that missed analysts' forecasts. [ID:nN1E76Q1J6]

Exxon has aggressively pushed into U.S. natural gas, while Chevron has made a more deliberate move with two deals in the Marcellus shale in the past year. Kirkland signaled there would be no more big deals.

"We're very close to putting together what we want in the Marcellus," Kirkland said. "There will be additional additions, small additions there, where it makes sense."

As for Bulgaria, where the San Ramon, California-based company has added 1.1 million acres to its interests in Romania and Poland, he said seismic work would likely begin next year.

In the Gulf of Mexico, while some operators have expressed frustration at the pace of permitting, Kirkland said its near-term drilling program was on track with two more deepwater rigs due to join its three already working there now.

Chevron shares are up 15 percent in 2011, outpacing an 8 percent rise in the Chicago Board Options Exchange oil companies index .OIX and a 10 percent rise in Exxon's stock. (Reporting by Matt Daily in New York and Braden Reddall in San Francisco, editing by Dave Zimmerman, Phil Berlowitz)

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