Chevron, Texaco Profits Fall

ChevronTexaco Corp., created two weeks ago by Chevron Corp.’s $45.8-billion acquisition of Texaco Inc., said Thursday that third-quarter earnings fell at both companies because of lower oil and natural gas prices.

The companies beat analysts’ earnings estimates, as refining margins widened because prices for oil fell faster than products made from it. Chevron’s profit, excluding certain costs, topped the average estimate by 41 cents in a Thomson Financial/First Call survey.

“The big surprise was Chevron’s refining operations,” said Fadel Gheit, an analyst at Fahnestock & Co., who doesn’t own ChevronTexaco shares. “So far ChevronTexaco is the only oil company that’s beat consensus in a really big way.”

The companies reported separately because they were not merged in the third quarter. ChevronTexaco declined to comment on the company’s fourth-quarter outlook in a conference call.

Chevron’s net income fell 24% to $1.17 billion, or $1.82 a share, from $1.53 billion, or $2.35, a year earlier. Net income at Texaco fell 87% to $101 million, or 19 cents, from $798 million, or $1.46, lowered mostly by a $496-million write-down of the company’s stakes in two fuel-selling ventures.

Chairman David O’Reilly agreed to sell the stakes in the ventures, Equilon Enterprises and Motiva Enterprises, to Royal Dutch/Shell Group for $3.8 billion to win Federal Trade Commission approval for the merger. The stakes have been transferred to a trust pending the sale.

Shares of San Francisco-based ChevronTexaco, the second-biggest U.S. oil firm, rose 99 cents to close at $87.90 on the New York Stock Exchange.

The companies completed their merger as energy prices and fuel demand were plummeting. O’Reilly, who also is chief executive, is hoping cost cuts of $1.2 billion a year or more from the merger will help the company increase earnings while prices remain low.

Chevron’s revenue fell 13% to $11.9 billion, while Texaco’s declined 20% to $10.7 billion.