(Reuters) - Helped by rising oil prices, Chevron Corp (CVX.N) swung to a quarterly profit on Friday that still fell short of analyst expectations, dragging down the company's share price, and with it, the Dow Jones industrial average .DJI index.
The results showed that Wall Street analysts overestimated how much the No. 2 U.S. oil producer could improve with cost cuts in the quarter after two years of lackluster results.
“Sometimes when things are going well, it’s not uncommon for the Street to be optimistic,” said Brian Youngberg, an analyst at Edward Jones.
Since the end of 2014, Chevron has laid off 9.500 employees and slashed its annual budget to boost results and protect its dividend, which Chief Executive John Watson said on a Friday call with investors remained his top priority.
Most layoffs are “behind us,” he said.
“The trend of spend is down,” Watson said, forecasting the company will be cash-flow neutral this year. “We’ve made remarkable progress bringing our costs down.”
Like many U.S. oil producers, Chevron has benefited from the OPEC oil cartel’s move to curtail production, which has helped lift crude prices CLc1 in recent months.
The California-based company posted a net income of $415 million, or 22 cents per share, after a net loss of $588 million, or 31 cents a share, a year earlier.
Excluding one-time items, the company earned 21 cents per share. By that measure, analysts expected earnings of 64 cents a share, according to Thomson Reuters I/B/E/S.
Despite missing expectations, Chevron still is seen by many as a top-notch oil producer.
“The overall investment thesis hasn’t changed at all,” Youngberg said.
Production fell slightly to 2.7 million barrels of oil equivalent per day.
Earnings rose in the company’s upstream segments, which pump oil and gas, but dropped in the refining segments due to lower margins and higher taxes.
Chevron’s flagship Richmond, Calif., refinery, which is undergoing a $1 billion renovation, also had downtime during the quarter, denting profit.
Watson said he expected the company’s Wheatstone liquefied natural gas (LNG) project in Australia to come online this year. The nearby Gorgon LNG facility has shipped 10 LNG tankers since Jan. 1, he said.
In the Permian Basin of Texas, where Chevron controls more than 1 million acres of oil-rich land, the company plans to add a new drilling rig every 8 weeks, Watson said.
Shares of Chevron fell 2.5 percent to $113.68 in afternoon trading.
Reporting by Ernest Scheyder; Editing by Bernadette Baum