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Chevron Third-Quarter Profit Misses Estimates on Refining

Nov. 1 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil producer by market value, reported profit that lagged analysts’ estimates for a second straight quarter and said full-year costs and production won’t meet the company’s targets.

Net income fell to $4.95 billion, or $2.57 a share, compared with $5.25 billion, or $2.69, a year earlier, San Ramon, California-based Chevron said in a statement today. The per-share result was lower than 20 of 21 analysts’ estimates compiled by Bloomberg and 13 cents below the average. Chevron shares fell the most in a month.

Shrinking refinery margins eroded gains from Chevron’s biggest oil and natural gas output growth in more than three years. For 2013, output may only reach 98 percent to 99 percent of the company’s original goal. Cash outlays for new drilling, offshore platforms and other capital projects probably will exceed the company’s initial $36.7 billion estimate by 10 percent, Chief Financial Officer Pat Yarrington said.

“There is a lot of concern that Chevron and the other major oil companies are spending so much,” Brian Youngberg, an analyst at Edward Jones & Co., said in an interview from St. Louis today. “Investors want assurances that they are allocating capital appropriately and not just chasing unprofitable production growth.”

Capital spending climbed by 26 percent during the quarter to $115 million a day, compared with a 21 percent increase during the April-to-June period. Yarrington, in a conference call with analysts today, said the higher full-year capital budget estimate stemmed from recently-acquired exploration prospects in Iraq, Canada and Australia.

Sales Rise

The shares fell 1.6 percent to $118.01 at the close in New York.

Sales rose 1.7 percent to $56.6 billion.

Profit from processing crude oil into fuels tumbled 45 percent during the third quarter to $380 million amid rising feedstock costs and repairs at a California plant that crimped gasoline and diesel output. The refining slowdown overshadowed a 2.7 percent rise in oil and gas production that was the largest since mid 2010. The supply increase was led by fields in Kazakhstan, Nigeria, Angola, Texas and Pennsylvania, according to the statement.

Chairman and Chief Executive Officer John S. Watson announced plans in December to spent $36.7 billion this year in a push to raise oil and gas production after two years of declining output. The approximate 10 percent increase announced by Yarrington today would lift spending above $40 billion.

Fields Auction

After lagging the full-year 2013 goal of pumping the equivalent of 2.65 million barrels of oil a day during the first nine months of this year, Vice President Jeff Gustavson said today that output probably will fall 1 percent to 2 percent short of that target.

Chevron also may sell some oil and gas fields that promise leaner returns than newly-acquired prospects, Yarrington said today. She didn’t specify any particular assets or regions that the company might be considering exiting, nor did she provide a time frame for such sales.

Exxon Mobil Corp. is the largest U.S. oil company by market value.

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

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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