asia.reuters.com Fri January 31, 2003 10:33 AM ET

SAN FRANCISCO (Reuters) - ChevronTexaco Corp. CVX.N , the No. 2 U.S. oil company, on Friday reported a quarterly profit, reversing a year-ago loss but posting results that were hurt by a drop in production and fell well short of analyst estimates.

The San Francisco company -- which owns 26.5 percent of troubled Dynegy Inc. DYN.N -- reported fourth-quarter net income of $904 million, or 85 cents a share, compared with a net loss of $2.52 billion, or $2.38 a share, a year ago.

However, excluding charges for special items and the company's merger, it reported earnings of $1 a share, or about 22 percent below consensus estimates on Wall Street.

Shares of ChevronTexaco, which fell 4 percent in the fourth quarter, were down as much as 3 percent in early trade.

Chairman and Chief Executive Dave O'Reilly in a statement called results for both the fourth quarter and the full year "unsatisfactory" adding that the company "operated under weak global market conditions in our refining and marketing sector and recorded a number of special charges against income."

As with much of the industry, robust oil and gas prices boosted the company's upstream exploration and production results, which rose 125 percent from a year-ago to $1.2 billion.

But the rise in profit was marred by concerns about ChevronTexaco's failure to increase its oil and gas production -- a key measure of future prospects for oil companies.

Hurt by factors such as OPEC quotas and tropical storms in the Gulf of Mexico, worldwide oil and gas production in the quarter dropped 6 percent to 2.6 million barrels a day,

The company also said earlier this week that capital spending this year will fall to $8.5 billion, 17 percent lower than before Chevron bought Texaco in 2001.

About three-quarters of the money -- or $6.4 billion -- will be invested in worldwide exploration and production, while refining and marketing investments will total about $1.3 billion. The remainder will go toward chemicals and other businesses.

Even so, Fadel Gheit, an analyst at Fahnestock & Co., was not fazed by the company's results and has a sanguine outlook.

"All in all, they missed earnings, but when you see why, most of the reasons are not irreversible things," he said. "There is no problem with their operations. They just happen to be the victims of circumstance."

DYNEGY TROUBLES

Charges for the most recent quarter included $52 million for the company's stake in Dynegy. ChevronTexaco has been under pressure because of its stake in the Houston-based energy company, which set a restructuring plan last fall and is struggling to reduce debt following credit downgrades.

Chevron has held a stake in Dynegy since 1996.

In the quarter, benchmark oil prices increased by more than 40 percent from a year earlier, amid fears of a potential war in Iraq and on the effects of a prolonged general strike in Venezuela, one of the largest crude exporters in the world.

While that helped its exploration and production earnings, the high commodity prices hurt refining, marketing and transportation, which posted a $151 million operating loss.

Revenue rose to $27.06 billion from $21.46 billion in the prior-year quarter.

Shares of ChevronTexaco were down 85 cents, or 1.32 percent, to $63.35 in Friday morning trade on the New York Stock Exchange after it missed the Thomson First Call consensus estimate of $1.28 a share in quarterly earnings. Shares fell to an earlier low of $62.30.

www.forbes.com Reuters, 01.31.03, 10:16 AM ET

CARACAS, Venezuela, Jan 31 (Reuters) - The president of Venezuelan state oil firm PDVSA said Friday that the nation's oil output has topped 1.5 million barrels per day (bpd) and could reach 1.8 to 1.9 million bpd next week as four Orinoco upgrading plants are restarted.

PDVSA President Ali Rodriguez told reporters that January oil exports had doubled from a low of 15 million barrels in December to 30 million barrels in January. Some of the production was being shipped to storage in the Caribbean to sell to customers still nervous about sending vessels to the world's No. 5 oil exporter.

The PDVSA chief said he had fired more than 5,300 striking workers as the government moved to break the eight-week-old opposition strike against President Hugo Chavez. PDVSA would also cut costs by 40 percent and slash investment by 30 percent to stave off the impact of the stoppage.

As part of its restructuring, Rodriguez said PDVSA would probably sell off some assets, but he declined to provide details. He said that the oil firm would meet its debt payments of more than $1.5 billion this year, but it would not issue bonds until Venezuela's economic situation improved.

The opposition strike, started on Dec. 2 to press Chavez to resign and accept elections, has driven Venezuela's fragile economy deeper into recession and rattled global energy markets jittery over U.S. preparations for a possible attack on Iraq.

www.thetrucker.com

Unrelenting economic turmoil in oil-rich Venezuela and the question of war still looming large over oil-soaked Iraq continue to pump up the prices of on-highway diesel in the United States.

From Jan. 20-27 nationwide, diesel rose an average of 1.2 cents to $1.492 a gallon, which is 34.8 cents higher than the same time last year.

California again showed the week's biggest individual boost, 2.7 cents, pushing it to $1.598 a gallon, or 33.9 cents more than a year earlier. However, California couldn't claim the distinction of having the highest cost. That dubious honor went to the Central Atlantic region, where diesel went for $1.6 a gallon. That's a week's increase of 2.1 cents and 34.7 cents higher than the previous year.

On the East Coast, diesel was costing drivers 35 cents a gallon more than in 2002 after an increase of 1.6 cents propelled the price to $1.526.

The West Coast reported the week's fourth highest increase, 1.5 cents, to put the price there at $1.543, or 32.9 cents more than 12 months earlier.

The New England and Lower Atlantic regions reported identical weekly increases, 1.4 cents a gallon. Still, truckers in New England were paying $1.608, which was the second highest in the country. It was also 31.5 cents more than in 2002. The average price in the Lower Atlantic rose to $1.483, which was 35.5 cents higher than for the previous year.

The next highest jump for the week was 1.3 cents in the Midwest, where the average cost per gallon was $1.472, higher by 35.3 cents than for the same week in 2002. Gulf Coast drivers paid an average of $1.463 a gallon, a bump of only nine-tenths of a cent for the week. Still, the total cost there was, on average, 35.3 cents more than a year earlier.

Diesel was at its cheapest in the Rocky Mountain region, where it sold for $1.454. That's also a weekly increase of only nine-tenths of a cent, but still 33.2 cents higher than the previous year.

-- By Jerry Breeden Trucker Staff January 31, 2003

www.cnn.com Friday, January 31, 2003 Posted: 9:55 AM EST (1455 GMT)

MIAMI, Florida (Reuters) -- War anxiety, rising fuel costs and a fragile U.S. economy have tempered the outlook for a Caribbean tourism industry wobbling toward recovery during the crucial winter vacation season, industry officials said.

Fear that the United States could soon be at war in the Middle East -- travel marketing expert Peter Yesawich calls it "Iraq-nophobia" -- is keeping some would-be travelers home and prompting others to wait until the last minute to book trips.

The balmy Caribbean islands, whose $34 billion-a-year visitor industry depends heavily on air travel from the eastern United States and Europe, took a thrashing after the September 11, 2001, attacks.

The World Tourism and Travel Council estimates the region lost more than 364,000 jobs as a result -- a significant chunk in an area where travel and tourism accounts for more than 14 percent of GDP and employs 2.1 million workers, or about one in seven. In some islands like the Bahamas, tourism generates more than half the jobs and economic activity.

Industry officials expect the final numbers for 2002 will show that visitor arrivals dropped by 5 percent to 10 percent from 2001 regionwide. But by the end of the year, holiday makers had begun to trickle back to the beaches and casinos, albeit with heavily discounted air fares and hotel rates that cut into industry profits.

"We began to see a recovery that began to look really quite promising by the end of 2002," Jean Holder, secretary general of the Caribbean Tourism Organization, said from the group's headquarters in Barbados.

Cuba and the Dominican Republic saw resurgences. Puerto Rico's hotel occupancy rate rose to 73 percent for the year, up from 70 percent in 2001 but still a couple of points below pre-September 11 levels, Holder said.

Air Jamaica saw its passenger count rise by 5 percent last year and its package tour operation has seen an 11 percent boost in bookings so far in 2003, said Allen Chastenet, the airline's vice president of marketing and sales, who also chairs the Caribbean Hotel Association's marketing committee.

Winter season

The gains augured well for the winter high season, when travelers normally flock to the Caribbean to escape the cold.

"Any real money that is going to be made in the industry, we certainly expect to make that in the winter," Holder said.

But overall bookings lag, with many reservations still coming in less than a month before travel.

"While we would normally have seen everything very much in place for February, February is probably the strongest month in the Caribbean, to date that is not the case," Holder said. "We are not despondent but ... we are certainly going into 2003 with a continued state of uncertainty."

"Overhanging the whole thing is the uncertainty caused by the threat of war."

Energy costs have hit two-year highs amid nervousness over a potential war in Iraq and a political strike that has choked supplies from Venezuela. Weak economies in the United States and Germany, a traditionally strong market, have pushed revenues down.

Airlines have cut fares by 20 percent and more, and hotels are discounting room rates by as much as 35 percent though mostly not at the top luxury resorts.

"There's a lot of deal-making going on," said Yesawich, president of Yesawich, Pepperdine, Brown and Russell, an Orlando marketing services company specializing in the travel industry. "The forecast from a consumer point of view is, if you put the time and effort into trying to find a great deal, you'll probably be rewarded."

Challenging year

For the industry however, "2003 is going to be a challenging year," he said. "If we get through this situation in the Mideast quickly and successfully, all the pointers are that recovery is going to be very quick."

Generally, destinations faring best are the bigger ones in the northern part of the region, which have the best air access -- Puerto Rico, the Bahamas and the Dominican Republic. La Romana and Punta Cana in eastern Dominican Republic have thrived by courting European charter business.

Curacao and the British Virgin Islands, which aggressively recruit European travelers, also saw increases in overnight stays at their hotels in 2002.

"The strongman in Europe has been the United Kingdom, which has continued to produce (visitors)," Holder said.

Security concerns posed special obstacles for other islands trying to lure back visitors.

Trinidad and Tobago was stung when the British government warned in December that the southern Caribbean nation was at increased risk of terrorist attack, prompting one cruise company to cancel visits.

Jamaica is struggling to rein in gang warfare that has sent its murder rate soaring. Though the violence has been largely limited to inner city neighborhoods far from the beaches where tourists flock, it has tarnished Jamaica's image.

In the meantime, the Caribbean visitor industry is ratcheting up promotional efforts.

Hotels, airlines and credit card companies have joined forces with island governments and tourist boards under the auspices of the Caribbean Hotel Association Charitable Trust to launch a $16 million regional marketing plan.

"You're going to see a very aggressive marketing campaign from the trade" Chastenet said. "I think that the consumer is still going to benefit from good value."

www.forbes.com Reuters, 01.31.03, 9:47 AM ET

(The following statement was released by the rating agency) NEW YORK, January 31, 2003: Fitch Ratings has placed the debt of Amerada Hess Corporation (Hess) on Rating Watch Negative. Fitch rates the company's senior unsecured debt and unsecured bank facility 'BBB' and the company's commercial paper 'F2'.

Yesterday, Hess announced a $530 million after tax impairment to the company's Ceiba Field in Equatorial Guinea (EG) due to higher development costs and a reduction in the probable reserves of the assets. The company also significantly decreased total production forecasts for 2003 to 360,000 barrels of oil equivalent per day (boepd). Total production for 2002 averaged 451,000 boepd.

Fitch has concerns with tightening free cash flow generation for Hess as a result of the lower production forecasts and sizable capital requirements going forward. The EG interests were some of the key assets in the $3.2 billion debt financed acquisition of Triton Energy completed in 2001. EG has been identified as a growth platform for Hess, however production from the Ceiba field for 2003 is expected to drop to 25,000 bpd. The lower total production forecast for Hess is also the result of planned divestitures in 2003 and a swap with BP of Hess's Colombian oil properties for BP's 25% interest in natural gas reserves in the joint development area (JDA) of Malaysia and Thailand. Hess is also seeing significant decline in gas production from the Gulf of Mexico as the assets acquired from LLOG in 2001 have been disappointing. In the third quarter of 2002, Hess recorded a $256 million after tax impairment of its Gulf of Mexico assets, representing a reduction of 29 million boe of proven reserves. The $750 million LLOG acquisition originally brought Hess 360 billion cubic feet of reserves (60 million boe).

Fitch also has concerns with Hess's ownership interest in the Hovensa refinery (rated 'BBB-' by Fitch on Rating Watch Negative). Hess is expected to maintain limited responsibility for the refinery following the financial completion of the new coker project. Hovensa faces significant capital expenditures to meet the low sulfur gasoline and diesel fuel regulations in 2004 and 2006 respectively, estimated at $440 million. While HOVENSA has some flexibility to defer the timing of the program without jeopardizing its ability to meet the implementation dates of the new standards, Fitch is concerned that a significant delay could hinder the refinery's ability to sell into the U.S. market.

Hess continues to benefit from strong commodity prices and will benefit from significant hedges in 2003 for both crude and natural gas. The company has also indicated that free cash flow will be used to reduce debt going forward. Hess had approximately $5.0 billion of debt outstanding at the end of 2002. The company maintains liquidity through a $1.5 billion 5-year committed bank facility (maturing in January 2006), commercial paper, cash flows and access to capital markets. Fitch will continue to evaluate the credit quality of Hess going forward and take rating action as warranted.

Amerada Hess is a large, independent oil and gas producer with operations focused in four core regions of the world - West Africa, the North Sea, the lower 48 states of the United States and Southeast Asia. Amerada Hess has historically been recognized as a mid-sized integrated oil company. With the sale of 50% of the St. Croix, Virgin Islands refinery to Petroleos de Venezuela, S.A. (PDVSA) in 1998, creating the Hovensa joint venture, Hess has steadily refocused the company on its upstream operations.