Chevron Corp. (>> Chevron Corporation) expects its fourth-quarter 2012 earnings to be "notably higher" than the previous quarter's, but profits are still weighed down by an August fire at its California refinery, the oil company said Thursday.
Chevron, the second-largest U.S. oil company after Exxon Mobil Corp. (>> Exxon Mobil Corporation) in market value, benefited from a $1.4 billion asset exchange in Australia and West Texas oil field acquisitions that boosted its oil and gas production. Its bottom line was also helped by a slight rebound in oil and natural gas prices that occurred midway through the quarter.
Chevron said average U.S. prices during the first two months of the fourth quarter rose over the previous quarter by 0.2% for crude oil and 20% for natural gas. Total U.S. production rose 6.1%, to 676,000 barrels of oil equivalent a day because of growth in West Texas operations and a recovery in the company's Gulf of Mexico operations following Hurricane Isaac in August.
In its international drilling operations, oil and gas production in the first two months of the fourth quarter rose 5.6% to 1.98 million barrels of oil equivalent a day from 1.88 million barrels a day in the third quarter. Production was boosted by fields in Kazakhstan and the UK returned to operations after scheduled maintenance earlier.
Chevron said it expected its refining business to post higher fourth-quarter earnings because it was able to take advantage of the price lags between when it bought oil and sold the finished fuel.
Offsetting the timing advantage was a steep drop in Chevron's refining margins and a persistent cut in fuel production after the fire at its 245,000-barrel-a-day refinery in Richmond, Calif. The fire damaged the main oil-processing unit, which is still awaiting repair as an investigation continues, and cut overall fuel production volumes by 77,000 barrels a day, the company said.
Chevron's West Coast refining margins were $19.45 a barrel for the fourth quarter, down 20% quarter over quarter amid the traditional winter slowdown in driving. Refining margins were also down nearly 18% in the U.S. Gulf Coast market and 33% in Singapore.
Chevron was able to bring its 330,000-barrel-a-day refinery in Pascagoula, Miss., to planned rates during the quarter. The refinery had been running at reduced rates after Hurricane Isaac.
Chevron also said it would pay up to $400 million in potential accruals related to income taxes, pension settlements and environmental matters during the quarter.
Write to Ben Lefebvre at firstname.lastname@example.org
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