ChevronTexaco profit more than doubles

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Associated Press

SAN RAMON, Calif. — ChevronTexaco Corp.’s second-quarter profit more than doubled as high energy prices extended a recent roll that is shaping into the most prosperous stretch in the oil giant’s 125-year history.

The San Ramon-based company said Friday that it earned $4.13 billion, or $3.88 per share, for the three months ended in June compared with $1.6 billion, or $1.50 per share, a year earlier. It represented the largest three-month profit that the company has recorded since its formation in 1879.

The results included a $585 million gain from the company’s sale of some Canadian assets and a $255 million benefit from changes in income tax laws governing some of ChevronTexaco’s international operations.

Even after subtracting those special items, ChevronTexaco would have earned $3.09 per share – beating the consensus estimate of $2.72 among analysts polled by Thomson First Call.

Revenue for the period totaled $38.3 billion, a 31 percent increase from $29.3 billion last year.

“I am very pleased with our performance,” ChevronTexaco chairman Dave O’Reilly said.

ChevronTexaco’s shares gained 17 cents Friday to close at $95.65 on the New York Stock Exchange. The stock had surged earlier this week after the company raised its quarterly dividend and announced plans for a 2-for-1 stock split in September.

The second quarter continued the momentum ChevronTexaco enjoyed during the first three months of the year when oil prices began an ascent that has required motorists across the country to pay more than $2 per gallon for gasoline. The highest gas prices have been highest in California, where ChevronTexaco is a market leader.

Through the first half of the year, ChevronTexaco earned $6.69 billion, or $6.28 per share, a 90 percent improvement from $3.52 billion, or $3.31 a share, in 2003. Revenue rose to $71.97 billion from $60.15 billion in the first half of 2003.

The industry’s soaring profits are being driven by oil prices that have climbed above $40 per barrel. Even if the prices decline slightly, the oil industry is likely to remain flush through at least the remainder of this year, predicted industry analyst Fadel Gheit of Oppenheimer & Co.

“As long as the price of crude oil remains above $30 per barrel, these companies will be printing money,” he said.

In the second quarter, ChevronTexaco fetched an average of $32.68 per barrel for U.S crude oil and natural gas liquids, up nearly 30 percent from a year ago.

ChevronTexaco is particularly well positioned to capitalize on high oil prices, Gheit said, because of the company’s prominence in the California market and the organizational fine tuning that has occurred since Chevron took over Texaco in a $39 billion merger completed in 2001.

The huge profits being raked in by ChevronTexaco and other major oil companies have fueled consumer complaints about possible price gouging – charges that industry executives have vehemently denied.

“This is turning into a racket,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, a Santa Monica watchdog group that wants the Federal Trade Commission to investigate the oil industry’s pricing practices.

“Every quarter, it seems like we see world-record profits on top of last year’s world-record profits. These profits aren’t being earned through any serious competition or great ingenuity. They are based on a commodity market that is being rigged by a few companies.”

The U.S. division responsible for ChevronTexaco’s refining and gasoline operations earned $517 million in the second quarter, more than doubling a profit of $187 million a year ago. ChevronTexaco’s average sales price for U.S. refined products reached $51 per barrel, a 34 percent increase from last year.

ChevronTexaco plans to play an even bigger role in the U.S. gas market. The company said Friday that it resumed selling gas under the Texaco brand in the South and East earlier this month. The company had relinquished the rights to the brand to win regulators’ approval of the merger between Chevron and Texaco, but that 2001 agreement left open the possibility that ChevronTexaco could later reclaim the name.

By the end of the year, the company hopes to be supplying more than 1,000 Texaco-branded stations. ChevronTexaco and its affiliates already sell gas through about 24,000 stations worldwide.

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