Chevron profit slides on weak oil

By Matt Daily and Braden Reddall

NEW YORK/SAN FRANCISCO (Reuters) - Chevron Corp (CVX.N) reported a 64 percent decline in quarterly profit on Friday, lagging Wall Street forecasts, as a sharp drop in energy prices stung the second-largest U.S. oil company.

Chevron, like other oil majors, is making efforts to adjust to the lower energy price environment but finding it harder than some smaller and nimbler rivals because of its size.

"They're cutting costs, they're changing what they're doing ... and conserving cash," said James Halloran, analyst at National City Private Client Group. "But the bigger they are, the harder it is to slow down quickly."

Production actually climbed by 64,000 barrels of oil equivalent per day from a year ago to 2.66 million boepd, even as reduced production quotas in OPEC states cut its output by 50,000 bpd during the quarter.

But the output increase was not nearly enough to compensate for the steep drop in oil and natural gas liquids prices, which fell by nearly 60 percent to $36 a barrel in the United States and by 55 percent to $39 a barrel in its international operations.

Citing the economy and weaker pricing, Chevron is keeping its dividend steady despite an expected rise, and said share buybacks, halted last quarter, were unlikely to resume this year.

"The share repurchases come after the dividend and they come after the capital program," Chief Financial Officer Pat Yarrington told analysts on a conference call.

Larger rival Exxon Mobil Corp (XOM.N) announced reduced buybacks alongside results on Thursday that disappointed investors who had been growing accustomed to energy companies reporting better-than-expected profits despite the collapse in crude oil prices.

Chevron said its net profit fell to $1.84 billion, or 92 cents per share, from $5.17 billion, or $2.48 per share, a year earlier. Revenue plunged 46 percent to $35 billion.

Excluding a $400 million gain from the sale of its marketing businesses in Nigeria and Brazil, its earnings of 72 cents per share were short of the average analyst estimate of 81 cents, according to Reuters Estimates.

Chevron shares were 0.2 percent higher at $66.24 by midday, following a drop on Thursday in response to Exxon results. Chevron is down 11 percent in 2009, versus a 5 percent decline for the Chicago Board Options Exchange oil index .OIX.

Asked about a $27 billion claim over environmental damage in Ecuador, Yarrington repeated the company's stance that the case was without merit and any remaining environmental damages were the responsibility of state oil company Petroecuador.

"It is possible that we could see a judgment come down any day now," she said. "It could also be several months from now. We will appeal that judgment whatever it turns out to be."

Later this month, at the annual meeting at its San Ramon, California, headquarters, Chevron faces a vote on a shareholder proposal for a report on the protection of people and the environment in countries where it operates.

(Reporting by Matt Daily in New York and Braden Reddall in San Francisco; editing by John Wallace, Lisa Von Ahn and Gunna Dickson)