Chevron 3Q profit slumps 51 percent; production up

NEW YORK - Chevron said Friday it pumped its way through a weak third quarter, producing more oil as prices recovered from a severe plunge earlier in the year.

The nation's second-largest oil and gas producer boosted revenues by increasing oil production by 11 percent. Its average sale price for crude and natural gas liquids over the past three months was $62 per barrel which is better than the previous quarter, but well below the $103 it fetched during the same period last year.

Higher crude prices can help and hurt integrated companies like Chevron. Their oil rigs can make more money by selling it to others, but their refineries also must use the more expensive oil, and that tightens profit margins.

"We continued to experience weak margins on the sale of gasoline and other refined products," Chairman and CEO Dave O'Reilly said in a statement. "Weak demand and plentiful supply affected all our major markets."

O'Reilly said in a conference call with investors that he expects Asian countries, especially China, to consume more gasoline next year and lead a recovery in the refining business.

"The Asian refining system will recover sooner than North America or Euorpe," O'Reilly said. "I feel pretty positive about it. It's still going to be sloppy in 2010, but it should improve sooner than other areas of the world."

The refining business saw earnings plummet 89 percent to $194 million in the July-September quarter. Chevron's exploration and production division fared better, especially from its international operations, though profits still tumbled 41 percent to $3.6 billion.

The company, based in San Ramon, Calif., reported that overall profits dropped 51 percent to $3.83 billion, or $1.92 per share when compared with the same three-month period last year. Last year's third quarter was one of the best for oil companies as crude contracts soared above $147 a barrel.

Chevron followed its peers including Exxon Mobil with results that appeared especially weak when compared with the go-go oil market from last summer.

The company said the weakness in the U.S. dollar this year made it more expensive to operate overseas, resulting in foreign exchange charges of $81 million for the quarter.

Chevron shares gave up $1.41, or 1.8 percent, to close at $76.54 Friday.

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