Chevron says Q2 hit by U.S. refining, weak dollar
SAN FRANCISCO (Reuters) - Chevron Corp (CVX.N) warned that second-quarter earnings would be hit by a sharp decline in U.S. refining margins and that any benefits from higher oil prices were largely offset by a weaker dollar, sending its shares down 1.8 percent.
The outlook from the second-largest U.S. oil company only contributed to the gloom surrounding the country's refiners in the face of toughening regulation and a depressed fuel market.
Chevron said on Thursday the decline in second-quarter U.S. refining margins more than offset an increase in marketing margins, while margins were mixed outside its home country.
Refining margins have been squeezed by higher crude prices, which lift input costs, and weak demand due to the recession.
"Downstream results are projected to be significantly lower than the first quarter," Chevron said in its interim update.
Chevron said U.S. oil-equivalent production in April and May was 682,000 barrels per day (bpd), up from 671,000 in the first quarter, while international output was 1.979 million bpd, down by 13,000 bpd from the previous quarter.
Chevron is targeting overall average output of 2.63 million bpd for 2009. In late May, about 100,000 bpd of production in Nigeria was shut in due to violence. But a series of projects are also starting up this year, including its Frade project off the coast of Brazil.
DIPPING DOLLAR
Benchmark U.S. crude oil prices averaged just below $60 per barrel in the second quarter, up from $43 in the first quarter but less than half the average in the same quarter a year ago.
While that helped upstream earnings, the dollar declined 6 percent against a basket of currencies .DXY over the course of the second quarter, meaning any products sold in foreign currency translated into weaker earnings.
The San Ramon, California-based company is due to report second-quarter results on July 31.
Prior to the update, analysts had been expecting net profit before items of $2.46 billion, or $1.26 a share, on revenue of $20 billion, according to averages on Reuters Estimates.
That's up from a first-quarter profit of 72 cents a share. But in the second quarter last year -- which ended right before oil prices peaked -- Chevron earned $2.90 a share on revenue of nearly $83 billion.
Rival ConocoPhillips (COP.N) said this week high inventories and weak fuel margins would hurt its second-quarter refining results, while oil and natural gas production was expected to drop from the prior quarter.
Shares of Chevron were down 1.8 percent at $61.95 in extended trading on Thursday, near its four-month low of $61.90 touched on Wednesday. ConocoPhillips shares eased nearly 1 percent, while Exxon Mobil Corp (XOM.N) slipped 0.5 percent. Continued...
