Chevron's Q2 profit rises as record crude prices offset refining loss

Friday, U.S. oil giant Chevron Corp. (CVX: News, Chart, Quote ) reported 11% rise in profit for the second quarter, as record crude prices boosted earnings at its exploration and production business and offset a loss from its refining operations. Chevron followed its bigger rival Exxon Mobil Corp. (XOM: News, Chart, Quote ) in posting quarterly earnings lower than Wall Street estimates.

Like its peers, Chevron was also expected to report higher second-quarter profit amid soaring oil and gas prices. Though rising crude prices are benefiting oil companies' upstream business, the margins to produce gasoline have plummeted, with refiners struggling to pass through higher crude costs to customers. As a result, Chevron's refining business fell to a loss as the oil and gas major wasn't able to raise the prices of gasoline and other refined products to keep pace with rising costs for oil.

The San Ramon, California-based Chevron's second-quarter net income grew to $5.98 billion or $2.90 per share from $5.38 billion or $2.52 per share in the year-ago period. On average, 15 analysts polled by First Call/Thomson Financial expected earnings of $3.03 per share for the quarter.

Quarterly sales and other operating revenues in the second quarter 2008 were $80.96 billion, up from $54.34 billion in the year-ago quarter. Total revenues and other income climbed to $82.99 billion from $56.09 billion in the same quarter last year.

However, Chevron was not able to fully exploit the benefit of soaring oil prices as it produced lesser compared to last year. Worldwide oil-equivalent production was 2.54 million barrels per day in the second quarter, lower than 2.63 million barrels per day recorded in the same period previous year.

Fire damage at one of its refineries hampered its production. In addition, energy companies are struggling to increase production as oil-rich governments restrict access to the world's largest fields and there is growing competition from emerging- countries like India and China. Moreover, a surge in oil's price reduced the oil companies' output in countries where production-sharing contracts give a greater share of crude to governments when prices rise.