ChevronTexaco Misses Wall St Estimates

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.