From: Reuters
Published May 2, 2008 03:27 PM

Chevron Q1 profits up 10 pct on record oil prices

By Michael Erman

NEW YORK (Reuters) - Chevron Corp <CVX.N>, the second-largest U.S. oil company, said on Friday its first-quarter earnings rose 10 percent as record oil prices outweighed weak profits from gasoline production.

Oil prices have soared more than five-fold since 2002 on surging demand from emerging economies, supply concerns and the weak dollar. They broke $100 a barrel for the first time during the first quarter and hit a record of nearly $120 earlier this week.

Chevron's largest peers, Exxon Mobil Corp <XOM.N>, Royal Dutch Shell Plc <RDSa.L> and BP Plc <BP.L>, all posted sizable gains in the quarter, although Exxon's results disappointed on weak oil and natural gas production.

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Chevron's net income in the quarter rose to $5.17 billion, or $2.48 a share, from $4.72 billion, or $2.18 a share, a year before. Analysts, on average, had expected the company to earn $2.41, according to Reuters Estimates.

Last year's results included a one-time $700 million gain from the sale of refining assets in the Netherlands.

Sales and other revenue in the quarter rose 40 percent to $64.67 billion.

Benchmark U.S. oil prices averaged a record of nearly $98 a barrel during the quarter, up nearly 70 percent from a year earlier.

But margins to produce gasoline have plummeted, with refiners struggling to push through higher crude costs to customers. First-quarter gasoline prices rose only 33 percent year over year in the U.S. -- less than half crude's rise.

Profits from the company's exploration and production unit rose 76 percent to $5.13 billion, while earnings from refining and marketing plunged 84 percent to $252 million.

The company's production dipped 1.7 percent to 2.6 million barrels of oil equivalent per day, mostly due to declines of older fields in the U.S.

Argus Research analyst Phil Weiss said the company's dip in production worried him less than Exxon's output drop announced yesterday.

"Exxon's even bigger than Chevron, so it takes more to move the needle," he said.

Chevron said the average price it received for oil or other liquid hydrocarbons was $86.25, up 70 percent from a year before.

The San Ramon, Calif., company's capital spending was $5.1 billion in the quarter, 84 percent of which was for exploration and production projects. Chevron spent $2 billion to buy back shares during the quarter.

Soaring gasoline prices and record earnings have been sharpening scrutiny on big oil companies from politicians, driving some Democratic lawmakers to call for a windfall tax on the oil industry.

"Oil companies are racking up obscene profits left and right while American families are stretched to the limit by skyrocketing gas prices," Sen. Charles Schumer (D-NY) said in a statement after Exxon released its earnings on Thursday

"It's high time for Big Oil to pay its fair share."

Chevron shares were up 47 cents at $95.41 in afternoon trading on the New York Stock Exchange. They are up over 2 percent this year, slightly outperforming the Chicago Board Options Exchange's oil index <.OIX>, which is up around 1.9 percent over the same period.

(Reporting by Michael Erman, editing by Dave Zimmerman and Gerald E. McCormick)

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