Profit up sales down. We are getting ripped off!
SAN RAMON, Calif. - Coming off three straight years of record profits, Chevron Corp. on Friday reported its earnings surged yet again to start 2007 as the oil company cashed out of a Netherlands venture and cashed in on lucrative refining margins that have contributed to high gasoline prices.
The 18 percent increase in Chevron's first-quarter profit delivered another reminder of the oil industry's moneymaking prowess while motorists dig deeper into their pocketbooks to fuel their cars. The economic disparity has renewed calls for a windfall tax on the industry to help raise money for alternative energy.
Chevron earned $4.7 billion, or $2.18 per share, during the first three months of the year, compared with net income of $4 billion, or $1.80 per share, at the same time last year.
The San Ramon-based company turned a higher profit despite a 12 percent decline in revenue, to $48.2 billion during the period.
The profit included a $700 million gain from Chevron's sale of a minority stake in a Netherlands refinery. If not for that one-time boost, Chevron said it would have earned $1.86 per share. That figure exceeded the average estimate of $1.67 per share among analysts surveyed by Thomson Financial.
Chevron became the fourth of world's five largest publicly traded oil companies to release their first-quarter earnings this week, following BP PLC, ConocoPhillips and Exxon Mobil Corp. Combined, the four companies earned $22.2 billion, up by 4 percent from last year.
Royal Dutch Shell PLC, Europe's largest oil company, is scheduled to report its first-quarter results May 3.
The latest quarter demonstrated that lower oil prices don't necessarily translate into lower profits for major oil companies.
While oil prices fell from the same time last year, refining margins were generally higher. The refining margin reflects the difference between what it costs to refine crude oil and what the company makes from selling the finished products, such as gasoline and jet fuel.
In the western United States, Chevron's first-quarter refining margin climbed to $26.69 per barrel, a 46 percent increase from the same time last year.
Those kinds of hefty refining margins eventually trickle down to the gasoline pump, where prices have soared beyond $3 per gallon in some parts of the country.
Excluding the Netherlands sale, Chevron's first-quarter profits rose 59 percent to $923 million in its "downstream" operations _ the company arm that refines oil and sells gasoline.
Chevron probably would have made even more money during the first quarter if not for maintenance work and a fire that shut down a major refinery in Richmond for most of the period.
The oil industry can more easily afford those kinds of operating hiccups with oil selling for as much as it has in recent years. Although they have fallen from last summer's peak of nearly $78 per barrel, oil prices remain above $60 per barrel _ a level that once seemed unsustainable, said Oppenheimer & Co. analyst Fadel Gheit.
If prices remain at these levels, "the oil industry won't be in the oil business much longer. It will be in the money business," Gheit said.
The favorable market conditions have enabled Chevron to earn $45 billion during the past three years, with its profit growing progressively higher each year. Chevron's stock price has increased by more than 80 percent over the same period, creating about $75 billion in shareholder wealth.
Chevron shares fell 18 cents to $78 in Friday afternoon trading on the New York Stock Exchange.
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