May 1 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, posted its lowest profit in five years after the global recession cut fuel demand, dragging down energy prices.

First-quarter net income fell 64 percent to $1.84 billion, or 92 cents a share, from $5.17 billion, or $2.48, a year earlier, San Ramon, California-based Chevron said today in a statement. Excluding divestiture gains, profit was 72 cents a share, 9 cents below the average of 13 analyst estimates compiled by Bloomberg.

Earnings from oil and natural-gas wells in the U.S. plunged 99 percent to $21 million as crude futures in New York traded 56 percent lower than a year earlier, the biggest decline in more than a quarter century. U.S. motorists cut fuel use by enough to fill more than 50 supertankers as the world’s largest economy shrank. Chevron’s revenue dropped 46 percent to $35 billion.

“Prices have come down so far that nobody’s showing a higher profit,” said William Andrews, who helps manage $6.3 billion, including Chevron shares, at C.S. McKee & Co. in Pittsburgh. “What Chevron’s got going for it is they haven’t backed off on their exploration program, which means they’ll be in a position to capitalize when the economy recovers and prices rebound.”

Chevron rose 77 cents to $66.87 in New York Stock Exchange composite trading. The shares fell as much as 1.1 percent after the earnings report was released this morning, before oil and gas futures jumped more than 3 percent. Before today, the stock had dropped 11 percent this year.

Demand Slumps

The outlook for energy demand worsened last month when the International Energy Agency in Paris said worldwide oil use will drop 2.8 percent this year, almost double the decline estimated in March.

Chevron was paid $36 a barrel, on average, for crude pumped from U.S. wells, 59 percent less than a year earlier. Chevron’s U.S. gas sold for $4.14 per thousand cubic feet, a 45 percent decline, as factories idled production lines and cut shifts. Gas accounts for about 30 percent of Chevron’s output.

Lower prices more than offset a 2.5 percent increase in Chevron’s worldwide production, which climbed to the equivalent of 2.66 million barrels a day, the highest since 2006.

Chevron capped a week of bearish profit reports by major oil companies. Exxon Mobil Corp., the world’s largest company by market value, yesterday reported a 58 percent decline in first- quarter net income to $4.55 billion.

PetroChina, Shell

PetroChina Co., the second-biggest oil company by market value, said April 28 that its net income slid 35 percent to 18.96 billion yuan ($2.8 billion). A day later, The Hague-based Royal Dutch Shell Plc, Europe’s biggest oil producer, said its profit fell 62 percent to $3.49 billion. BP Plc reported a 64 percent plunge in net income to $2.56 billion.

“Everyone is at the mercy of the economy,” said Paul Cheng, an analyst at Barclays Capital in New York who rates Chevron shares at “buy.”

Chevron Chief Executive Officer David O’Reilly plans to boost output by 4 percent this year, to the equivalent of 2.63 million barrels of oil a day, after 2008 production dropped by the most in half a decade.

Output in the Gulf of Mexico remains slowed by repairs from hurricane damage last year, company spokesman Jim Aleveras told investors today on a conference call. Repair work is only to the point Chevron expected to reach by the beginning of this year, he said.

Buybacks Halted

O’Reilly, 62, spent $6.47 billion during the January-to- March period to search for untapped fields and bring new developments from Indonesia to Brazil into production. Chevron had $9.15 billion in cash and cash equivalents as of March 31, down 2.1 percent from the end of 2008.

Chevron, which suspended stock buybacks in January, probably won’t repurchase any of its shares for the rest of this year, Chief Financial Officer Patricia Yarrington said on the conference call. She said the company expects to make $800 million in contributions to its pension plan this year, and debt may increase after the plunge in energy prices.

First-quarter profit from global oil and gas production tumbled 75 percent to $1.27 billion. Earnings from U.S. refining rose to $133 million from $4 million a year earlier as lower crude costs widened profit margins on gasoline and diesel. U.S. fuel sales fell 2 percent, Chevron said.

In Chevron’s overseas refining business, profit more than doubled to $690 million, driven mostly by a $400 million gain on the sale of gasoline stations in Nigeria and Brazil. Demand for fuel in Chevron’s international markets declined 5 percent.

“This is going to be a miserable year for the entire oil sector,” said Gianna Bern, president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois. “We’re going to continue to see weaker-than-expected crude-oil demand, and we’re going to hear negative economic news weighing on energy markets until the second half of 2010.”

To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net.

Last Updated: May 1, 2009 16:14 EDT