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Chevron Expects Lift In Profit From Prices

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Chevron Expects Lift In Profit From Prices

July 11, 2008; Page B4

Chevron Corp. said it expects second-quarter earnings to get a big lift from record-high oil and natural-gas prices, while weak margins continue to afflict its refining operations.

Earnings from its downstream refining and marketing operations are expected to fall $500 million from the first quarter, when Chevron reported an 84% decline. That reflects weaker refining margins as pump prices lagged the rise in crude prices.

In its interim quarterly update, issued after the closing bell Thursday, Chevron said earnings from its upstream business, which includes exploration and production, benefited from higher oil and gas prices. First-quarter earnings in Chevron’s oil-and-gas production segment surged 76% to $5.13 billion.

In addition, Chevron, among the largest U.S. oil companies by market value, said charges are likely to be “substantially higher” than in the first quarter, mostly on costs for environmental remediation.

The San Ramon, Calif., company had been expected to post per-share profit of $3.39 on revenue of $92.41 billion, the average estimates of analysts surveyed by Thomson Reuters.

During the first two months of the second quarter, Chevron, a component of the Dow Jones Industrial Average since February, fetched on average $109.19 a barrel for crude oil from its U.S. fields, up from $89.63 for the full first quarter and $58.89 a year earlier. Internationally, Chevron’s realized crude prices rose about $20 a barrel from the first quarter to $106.14 a barrel.

Chevron said oil production was flat in the U.S. and down 2% internationally as higher prices cut production under cost-recovery and variable-royalty provisions of some international production contracts.

U.S. natural-gas production fell almost 5% because of operational downtime and natural field declines. Overseas gas output fell about 3%.

Write to Kathy Shwiff at [email protected]

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