Astounding profits in the oil industry are becoming as routine as the anguished looks of motorists filling up their gas tanks.
Chevron Corp. put yet another exclamation point on the oil patch’s long run of prosperity Friday with a first-quarter profit of $5.17 billion, or $2.48 per share. That was up 10 percent from net income of $4.72 billion, or $2.18 per share, last year. The performance exceeded the lofty expectations of analysts.
It was the second-highest quarterly profit in the company’s 129-year history and marked the most money that it has ever made during the January-March period. That puts the No. 2 U.S. oil company on track for its fifth straight year of record earnings.
About the only downside to the quarter was that Chevron earned relatively little from gasoline sales because it couldn’t raise its prices fast enough to recover its own rising costs for oil. Like its peers, Chevron doesn’t produce enough oil on its own to feed its refineries, forcing it to buy some on the open market.
The company’s division that refines and sells gasoline earned $252 million during the first quarter, plunging 84 percent from $1.6 billion at the same time last year.
But Chevron still pumped out plenty of oil to cash in on prices that recently approached $120 per barrel before retreating slightly. In the United States, the San Ramon-based company pocketed an average of nearly $90 per barrel for crude oil sold in the first quarter, more than doubling the $38.03 per barrel at the same time last year.
Soaring oil prices provided a similar first-quarter lift to four of Chevron’s biggest rivals — Exxon Mobil Corp., ConocoPhillips, BP PLC and Royal Dutch Shell PLC.
Collectively, Chevron and those four companies earned $36.9 billion in the first quarter, a 25 percent increase from last year.
By comparison, five of the world’s most influential technology companies — Microsoft Corp., IBM Corp., Intel Corp., Google Inc. and Apple Inc. — earned $10.5 billion in the same period, up just 3 percent from last year.
While good news for the oil companies’ shareholders, the industry’s latest earnings gusher may provide more fodder for U.S. lawmakers who have been threatening to impose a windfall tax on the sector or adopt other measures aimed at increasing energy supplies. The political backlash could become even more acute as the price of gasoline rises above $4 per gallon in many parts of the country.
“President Bush and Congress must act immediately and take the obvious steps to end the crisis that threatens not only every consumer but our entire economy,” said John Simpson, an advocate for Consumer Watchdog, a frequent industry critic.
Oil industry executives insist they have little control over prices that have been driven up amid concerns about diminishing supplies and the weakening dollar.
If the sentiments of speculative investors who have helped increase oil prices suddenly swing in the other direction, Chevron and other big oil companies will suffer — particularly if the feeble U.S. economy weakens any further, Oppenheimer & Co. analyst Fadel Gheit wrote in a note Friday.
Chevron’s first-quarter earnings improvement was even more impressive than the reported number indicated because last year’s results were boosted $700 million by a one time-gain.
If not for last year’s windfall and foreign exchange losses that shaved $45 million from this year’s bottom line, Chevron’s first-quarter profit would have been up by 31 percent, Citigroup analyst Doug Leggate estimated in a Friday research note.
As it was, the company’s earnings were 7 cents above the average estimate among analysts surveyed by Thomson Financial.
But revenue of $65.95 billion fell well below analysts’ forecast of $75.64 billion. Nevertheless, it still surged 37 percent from last year’s $48.23 billion.
Chevron’s revenue would have been higher if its oil production hadn’t slipped by about 44,000 barrels per day from last year. The company’s production averaged 2.6 million barrels of oil per day in the first quarter.