NEW YORK/SAN FRANCISCO (Reuters) - Chevron Corp (CVX.N) posted weaker-than-expected quarterly profit, hurt by lower production and higher expenses in the United States as well as a decline in the value of the dollar.
The disappointing profits from the second-largest U.S. oil company on Friday followed strong performances from larger rivals this week, and Chevron shares fell 1.5 percent.
“This was definitely a disappointing result,” Argus Research analyst Phil Weiss said, pointing to higher U.S. costs resulting largely from the moratorium on Gulf of Mexico drilling that followed BP Plc’s (BP.L) disastrous well blowout. “They are paying for rigs that are not in service.”
With six shallow-water and three deepwater rigs under contract for the Gulf of Mexico as of May, Chevron had more exposure to the tighter drilling restrictions than any other exploration company.
Chief Financial Officer Pat Yarrington said she could not be sure of when activity in the Gulf of Mexico would pick up because of uncertainty surrounding the granting of new permits, even now that the moratorium has been lifted.
“There is some progress, but I think it’s going to be slow,” Yarrington said on a conference call with analysts. “We are hopeful in the next several weeks, couple of months, that we will have a better indication of how long exactly it will take to get through the permitting process.”
Third-quarter net income fell to $3.77 billion, or $1.87 per share, from $3.83 billion, or $1.92 per share, a year ago, when earnings were boosted by asset sales. Analysts had expected $2.15 per share, according to the average on Thomson Reuters I/B/E/S. Revenue rose 7 percent to $49.72 billion.
Chevron said foreign exchange effects led to a $600 million drop in earnings between the second and third quarters, as the dollar fell 7 percent against a basket of currencies .DXY.
Chevron’s global output in the quarter rose 1 percent to 2.74 million barrels of oil equivalent (boe) per day, largely due to growth in Thailand and Brazil, but its U.S. production fell 7 percent, or 53,000 boe per day, to 692,000 boe per day.
The company said that U.S. output drop was due to “normal field declines” and downtime for maintenance and repairs.
Yarrington said Chevron was on track to meet its raised average output target of 2.78 million boe per day for 2010.
Profit from the company’s downstream arm, including refineries and chemicals production, more than doubled to $565 million in the quarter, but the head of that division expected tough years ahead for its fuel products business.
“In the refining sector, we continue to see pretty tepid demand growth,” Mike Wirth, executive vice president for global downstream, told analysts on the call. “Some parts of the world are certainly showing decent demand growth, others are not.”
Chevron shares fell 1.5 percent to $83.13. As of Thursday, the stock had gained 10 percent so far this year, while the Chicago Board Options Exchange’s oil company index .OIX — which includes BP’s battered shares — was down 1 percent.
At about $76.50 a barrel, benchmark U.S. oil prices averaged more than 12 percent higher than in the same quarter last year, but that was down from $78 in the second quarter.
Chevron, based in San Ramon, California, had said earlier this month it would resume quarterly share buybacks of up to $1 billion after a pause of nearly two years.
Reporting by Matt Daily in New York and Braden Reddall in San Francisco, editing by Dave Zimmerman