NEW YORK – ChevronTexaco Corp. (CVX), the No. 2 U.S. oil company, on Friday said its quarterly profit quadrupled as refining and marketing margins improved and gas and oil prices rose.
The San Ramon, California, company also unveiled plans to sell $1 billion to $2 billion in assets a year for the next few years to boost returns and close the performance gap with more highly valued rivals Exxon Mobil Corp. (XOM) and BP.
Chairman and Chief Executive David O'Reilly, meeting with analysts in New York, acknowledged the 2001 Texaco merger hurt Chevron Corp.'s performance for the past two years. But profits and returns are poised to rise, he said, closer to Chevron's pre-merger levels and on par with the world's premier oil companies.
"When we merged, we said we would improve in 2003 to 2004 and so far we are on track," O'Reilly told reporters after the analyst meeting. "Now we're ready to go for the brass ring."
ChevronTexaco intends to sell about 400, or one-third of its oil and gas fields in North America, as well as properties in the North Sea. The company recently sold its stake in a Papua New Guinea venture.
In all, the fields to be sold produce about 115,000 barrels per day, or 4 percent of second-quarter output. O'Reilly said the company now expects an average 1 percent to 2 percent annual production growth through 2008, reflecting asset sales, decline rates and new projects.
The company also is overhauling its global refining and marketing business, focusing on California, the U.S. Gulf Coast, sub-Saharan Africa and Southeast Asia. Downstream operations in Australia, New Zealand and Europe are now on the block.
ChevronTexaco also will sell about 1,500 service stations, of which 550 are in the United States. Shedding assets and reorganizing operations globally along business lines will generate $500 million in savings by 2005, the company said.
But O'Reilly also said he's committed to the downstream business in Asia and Africa, contrary to speculation the company's sprawling CalTex division was expendable.
Under federal rules, ChevronTexaco cannot make major asset sales until October, the two-year anniversary of the merger.
Shares of ChevronTexaco fell 80 cents, or 1.1 percent, in afternoon trade on the New York Stock Exchange.
Good Place to Be
ChevronTexaco reported net income of $1.6 billion, or $1.50 a share, for the second quarter after an 11-cent charge for assets being sold. A weaker dollar reduced per-share earnings by 15 cents.
Excluding the charge, operating earnings were $1.61 a share, beating the consensus analyst estimate of $1.52 a share, according to Reuters Research, a unit of Reuters Group Plc.
"It was a pretty good quarter, though they have to be concerned about production volumes," Deutsche Bank analyst Paul Sankey said.
Last year ChevronTexaco's profit plunged to $407 million, or 39 cents, on weak refining earnings and after nearly a billion dollars in charges, mostly related to its investment in troubled energy trader Dynegy Inc. (DYN)
Revenue rose 16 percent to $29.4 billion on sharply higher oil and gas prices as well and higher prices for refined products.
Exploration and production income rose 3 percent to $1.28 billion, while refining and marketing earnings surged 24-fold to $438 million from last year. The chemicals business generated $34 million of income.
Worldwide oil and gas production fell 3.7 percent to 2.69 million barrels per day, driven by a 9 percent decline in U.S. output and flat growth internationally. The company said output from U.S. properties is declining at a rate of 6 percent per year.
Energy prices this year have remained historically high into the second half amid continued concern about inventories, disruptions in Nigeria, and the U.S. invasion of Iraq. Downstream results have been strong in many regions.
And many analysts expect oil and gas prices to stay high this year, since storage levels are still likely to remain below average.
"As long as energy prices stay where they are, ChevronTexaco is a good place to be," Sankey said.
Shares of ChevronTexaco fell $1.06 to close at $71.05 on the New York Stock Exchange.