Chevron Says Net Income Suffered as Energy Output Declined

Jan 10, 2014 4:25 pm ET

(Updates with closing share price in sixth paragraph.)

Jan. 10 (Bloomberg) -- Chevron Corp., the world’s second- largest energy company by market value, will report a drop in fourth-quarter profit after oil and natural gas production declined amid slumping prices.

Net income during the period was “comparable” to the $5 billion earned during the third quarter, the San Ramon, California-based company said in a statement yesterday. That compares with a $7.25 billion profit for the final three months of 2012.

Chevron joins U.S. competitors such as ConocoPhillips hurt by slumping oil and gas output as weakening demand growth in the world’s largest economies pressures prices. Chevron underperformed its biggest U.S. rivals -- Exxon Mobil Corp. and ConocoPhillips -- last year in stock performance and lagged the industry average by almost half.

“Chevron really struggled on production last year but it looks like they’re going to turn that around in 2014,” Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis who rates Chevron shares a buy, said in a telephone interview.

At least four analysts cut their earnings estimates after Chevron released its statement, lowering the average prediction for per-share profit in the fourth quarter to $2.83 from $2.87. That excludes some extraordinary items and was based on 17 estimates compiled by Bloomberg.

Chevron fell 1.9 percent to $121.01 at the close in New York, the most since Oct. 3 and the biggest decline in the Standard and Poor’s 500 Energy index of 44 companies. The shares have gained 9.5 percent in the past year.

Boosting Output

Chairman and Chief Executive Officer John S. Watson plans to spend almost $40 billion on floating platforms, gas-export terminals and exploratory wells this year as part of a plan to boost worldwide output 20 percent by the end of 2017.

Chevron pumped the equivalent of 2.564 million barrels of crude daily during October and November, according to the statement. That’s almost 4 percent lower than the full-quarter average of 2.668 million from the year-earlier period.

Given the decline in output, the company has no chance of meeting its full-year output target announced in March of 2.65 million barrels a day, Youngberg said.

ConocoPhillips warned investors this week that fourth- quarter production slipped to a nine-year low because of bad weather in the U.S. and the North Sea that interfered with operations. The Houston-based company said Jan. 7 that output dropped to a daily average equivalent of 1.475 million barrels a day.

ConocoPhillips is scheduled to release full quarterly results on Jan. 30, as is Exxon, the world’s biggest energy company by market value. Chevron will report results the next day.

--Editors: Will Wade, Tina Davis