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.

More Americans feel gas price pain

NEW YORK -- The high price of gas is taking a financial toll on an increasing number of American households, according to a poll released Friday.

A CNN/Opinion Research poll found that 75% of respondents said the price at the pump is a "financial hardship." That finding was up from 60% in late April and 69% in April 2006.

The poll, which has a margin of error of 4.5%, was conducted July 27-29 and involved more than 500 respondents.

In the poll, 27% said high petroleum prices were causing a "severe hardship" on their standards of living. Another 48% said gas prices caused a "moderate hardship."

Families with middle and lower incomes are feeling the sting more acutely, as rising gas and food prices spill into the core inflation rate, according to Heidi Shierholz, an economist at Washington, D.C.'s Economic Policy Institute, considered a liberal research firm.

"Households that use a higher proportion of their income on those two things are going to face the biggest hit to their take-home income," she said.

On Friday, the average price for a gallon of unleaded gasoline was $3.898, according to motorist group AAA. While that was down more than 21 cents from a record high of $4.114 a gallon on July 17, it was more than $1 higher than the $2.865 level of a year ago.

Americans remain largely pessimistic about the financial drain at the pump, according to a separate CNN/Opinion Research poll released Friday of more than 500 people.

Asked if they think the price of gasoline will be higher a year from now, about the same or lower, 51% of 514 respondents said they think prices will be higher.

In the same survey, 52% of respondents predicted gas prices will never be lower.

The higher gas prices come as many Americans may face reduced hours and even job losses in the economic slowdown, Shierholz said.

"The job market is not going to turn around any time soon," she said, and so those struggling with higher gas prices "won't find solace in the job market for quite some time."

And despite the hardships posed by high prices, consumers aren't likely to drastically alter their driving habits, said Chris Lafakis, an associate economist at Moody's Economy.com, an economic analysis firm based in West Chester, Pa.

If people have to drive 15 miles to work, for example, they're likely to continue the same commutes in the short term until they find other ways to get around, such as mass transit or more fuel-efficient cars, Lafakis said.

"In the short term, consumer grumbling is all bark and no bite," he said

European currency falls to 15-day low against Japanese yen

During early deals on Friday, the European currency traded down against its major counterparts. The euro declined to a 15-day low versus the Japanese yen, 8-day low against the British pound and a 2-day low versus the US dollar.

Adding to euro's downward pressure, a report showed that German retail sales fell more than expected in June. German retail sales declined 3.9% year-on-year in real terms in June, much greater than the 0.8% slump expected by economists. The decline is in contrast to a 1% increase in May, revised up from the initially reported 0.7%. In nominal terms the increase was 1.2% in June compared to a 3.8% rise in the previous month.

Against the US dollar, the European currency traded down in early deals on Friday. At about 1:25 am ET, the euro-dollar pair touched a 2-day low of 1.5552, compared to 1.5605 hit late New York Thursday.

The European single currency declined to an 8-day low of 0.7850 against the British pound at about 1:15 am Eastern Time Friday. The euro-sterling pair closed Thursday's North American session at 0.7867.

Against the Swiss franc, the euro is currently trading at 1.6326, down from Thursday's close of 1.6339.

The European currency showed weakness against the Japanese yen in early deals on Thursday. At about 1:40 am Eastern Time, the euro-yen pair slipped to 167.33, down from yesterday's close of 168.42. This set a 15- day low for the pair.

Looking ahead, the manufacturing PMI reports from Germany, France, Italy and the Euro-zone for the month of July are expected in the upcoming hours.

The PMI for UK manufacturing industry is due at 4.30 am ET. Economists are expecting a reading of 45.5.

Across the Atlantic, the US change in nonfarm payrolls, unemployment rate, ISM manufacturing and construction spending reports are scheduled to be released.

US STOCKS-Wall Street dips on GM loss, oil, jobs data

* Oil rises on tension about Iran's nuclear work

* Hefty loss at GM adds to U.S. auto sector woes

* Biogen sinks biotechs, pulls down Nasdaq

* Dow down 0.5 percent; Nasdaq, S&P off about 0.6 pct (Updates to close, changes byline)

NEW YORK, Aug 1 (Reuters) - U.S. stocks fell on Friday as a $15.5 billion quarterly loss from General Motors (GM.N: Quote, Profile, Research) and a rise in oil prices added to fears the economy could slip into recession and concerns about corporate earnings.

A government report showing U.S. employers cut jobs for the seventh straight month in July added to market worries, though the decline in payrolls was not as severe as had been feared. The report also showed the jobless rate jumped to its highest level in four years. For more see [ID:nN01429062].

General Motors' (GM.N: Quote, Profile, Research) second-quarter loss was the latest example of how rising oil prices are hurting consumer spending. Its shares slumped 7.6 percent to $10.23 and weighed on the Dow and S&P.[ID:nN01288721].

Sliding global metal prices and weak manufacturing data around the world knocked the shares of aluminum maker Alcoa (AA.N: Quote, Profile, Research) nearly 5 percent lower. Shares of Caterpillar (CAT.N: Quote, Profile, Research), the mining and heavy equipment maker, fell 2 percent. The two were the top drags on the Dow

EDF's Board Approves 12 Billion-Pound British Energy Offer

July 31 (Bloomberg) -- The board of Electricite de France SA, the world's largest owner of nuclear power stations, approved a 12 billion-pound ($23.8 billion) offer for British Energy Group Plc, a person with direct knowledge of the decision said.

EDF may offer about 765 pence a share in cash, or a mixture of cash and securities, said two people familiar with the plan, who declined to be identified because the talks are confidential. The bid would be 5 percent above today's close of 729.5 pence and 13 percent more than the close on May 15 before British Energy said it received approaches.

The Paris-based utility, which already has 7.9 million customers in the U.K., will get eight U.K. atomic plant sites with potential for building new reactors. The U.K. government, which owns a 35.6 percent stake, wants investment in new nuclear plants and is identifying sites for reactors.

``For EDF, it's a wholly logical step,'' said Ingo Becker, an analyst at Kepler Equities in Frankfurt, in a telephone interview today. ``The U.K. is one of the few countries in Europe encouraging new nuclear build.''

Electricite de France, which announces earnings tomorrow, will hold a press conference in Paris at 8:45 a.m. local time. Francois Molho, a spokesman for the company, declined to comment on the reason.

The French utility will have to give up control of some of sites owned by the East Kilbride, Scotland-based British Energy, two people familiar with the plan said yesterday.

Nuclear Sites

U.K. Energy Minister Malcolm Wicks said in a Bloomberg Television interview on April 17 that Britain is wary of a monopoly company or business group having control of all new nuclear power stations in Britain.

Prime Minister Gordon Brown said on June 22 in Saudi Arabia that he backs new atomic plants. In 2007 nuclear reactors produced 19 percent of the U.K.'s power. While Brown favors the technology because it emits less carbon dioxide, the gas blamed for global warming, than natural gas and coal-fed stations, he hasn't set a growth target for the industry.

A report produced for the government by Jackson Consulting recommended that any new capacity should be developed first at one of the country's existing nuclear sites. Those are owned by British Energy and the U.K. Nuclear Decommissioning Authority, an agency set up to run and clean up older plants.

Those locations already have the necessary road and rail links, access to water and grid connections, and local communities may be more likely to have the required skills.

New Capacity

``There is no guarantee that EDF will have exclusive use of the sites,'' said Florence Roche, a fixed-income credit analyst at Societe Generale SA in Paris. Without that exclusivity, it makes the deal even more expensive, she said yesterday. ``At the level of valuation reported by press, the assets are not very attractive.''

EDF recently bought land adjacent to the Wylfa power station, owned by the Nuclear Decommissioning Authority, as a backup plan in case it misses out on British Energy. The French power producer has said it wants to build as many as five nuclear reactors in the U.K.

British Energy in November signed an agreement with the national grid operator to connect six new nuclear reactors on four southern England sites to the country's power transmission network from 2016.

Centrica Plc may acquire about 25 percent of British Energy as part of the transaction, the people said.

Shares Rise

EDF rose 1.66 euros, or 3.1 percent, to 55.95 euros in Paris trading. British Energy rose 9.5 pence, or 1.3 percent, to 729.5 pence in London.

The Financial Times reported today that part of the EDF bid will be in the form of contingent value rights, securities which have future payouts dependent on the performance of British Energy after it has been taken over. It said these securities are less well-known to U.K. investors than to those in the U.S. and continental Europe, and may complicate negotiations.

The Financial Times said EDF's proposed bid includes an all-cash version which would be at a lower value than an alternative offer of cash plus CVRs. Dow Jones reported today that EDF's mixed offer of cash and securities would be 700 pence a share plus CVRs, as an alternative to a 765 pence cash bid.

Yearly euro inflation at record high of 4.1%

BRUSSELS, Belgium (AP) -- Yearly inflation in the 15 euro nations rose to a record high of 4.1 percent in July, the EU statistical agency Eurostat reported Thursday.
Inflation is becoming a headache across Europe as workers call for more money to meet surging fuel prices.

Inflation is becoming a headache across Europe as workers call for more money to meet surging fuel prices.

Prices have not climbed as fast since inflation records started in 1996 for the countries that eventually formed the euro.

Soaring fuel and food prices are Europe's biggest economic problem, eating into household spending -- one of the engines of economic growth -- as people steer away from major purchases and luxury goods.

Accelerating prices and signs that growth is stalling create a major dilemma for the European Central Bank, which acted last month to cool inflation by hiking borrowing costs for the first time in a year.

But the bank may have to hold back from more interest rate increases as the European economy stumbles and companies slash staff.

Eurostat reported that the jobless rate in the 15 countries that share the euro had risen to 7.3 percent in May and June from a year ago. It revised upward an earlier estimate of 7.2 percent for May as unemployment worsened from a record low it hit in December 2007.
Spain, hit hard by a housing slowdown, saw jobless lines increase sharply from June last year as the unemployment rate soared to 10.7 percent -- the highest among euro nations and in the 27-nation European Union. Nearly a quarter of Spanish young people do not have a job.

Ireland also saw a major increase in unemployment as a long boom comes to a sharp end. It reported unemployment of 5.7 percent last month.

Europe's largest economy, Germany, posted a jobless rate of 7.3 percent while France saw 7.5 percent.

Rising unemployment may serve as cold comfort to the ECB, which has pleaded with governments, employers and workers in euro nations to try and avoid wage hikes that could fuel an inflation spiral.

Slowing growth and the risk of further job losses may hold back wage demands despite workers' calls for their pay to keep pace with rocketing prices.

Ground staff at German airline Lufthansa AG have gone on strike seeking a 9.8 percent pay increase.

Inflation is fast becoming a political headache across Europe as workers call for more money and fishermen and truck drivers protest, sometimes violently, that surging fuel prices threaten their livelihoods.

Global oil prices have quadrupled in the last seven years, hitting Europeans hard because they also pay heavy taxes on fuel that can cost them some €80 ($126) to fill up a car's tank

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NEW YORK, Aug 1 (Reuters) - The U.S. dollar climbed to five-week peaks against the euro and three-week highs against the British pound on Friday as better-than-expected economic data allayed worries about a much sharper slowdown.

The yen, on the other hand, gained broadly, benefiting from heightened stress in financial markets on news that General Motors (GM.N: Quote, Profile, Research) had hefty losses in the second quarter. That dragged U.S. stocks lower and triggered safe-haven bids for Treasuries.

"U.S. dollar sentiment has certainly changed for the better over the last couple of weeks," said Mark Frey, head foreign exchange trader at Custom House, a global payments dealer in Victoria, British Columbia.

"The U.S. economy has gone through some tough phases, but the jobs number was negative, but still better than expected. I think, more importantly, recent consumer confidence numbers and leading indicators, which are more forward-looking, have been more positive," he added.

Friday's data showed that U.S. employers eliminated 51,000 jobs in July, lower than market expectations for a payrolls decline of 75,000. A separate report said U.S. factory activity was unchanged in July, compared with the previous month, but above market forecasts

Dollar Rises to One-Month High on View U.S. Slowdown Spreading

Aug. 2 (Bloomberg) -- The dollar rose to a one-month high against the euro as the pace of job erosion in the U.S. slowed while a decline in German retail sales indicated economic weakness is spreading to other developed countries.

The currency increased for a third week against the euro, its longest stretch of gains since May 2007. The Australian and New Zealand dollars fell against all of the other major currencies as reports showed Australia's manufacturing contracted and business confidence in New Zealand fell.

``The labor market hasn't changed dramatically, but certainly it's a relief that things haven't gotten worse,'' said Thomas Benfer, vice president of foreign exchange at BMO Capital Markets in New York. ``It looks like the global economy is slowing down. We're not going to see a surge in the dollar, but it's moving in the right direction.''

The dollar appreciated 1 percent this week to $1.5564 per euro, from $1.5709 on July 25. It touched $1.5515, the strongest since July 24. The dollar dropped 0.1 percent to 107.71 yen, from 107.84. Japan's currency gained 1 percent to 167.55 per euro, for the biggest weekly gain since early May. It touched 166.99 yesterday, the highest level since July 17.

The Federal Reserve will keep its target lending rate at 2 percent on Aug. 5, while the European Central Bank will hold its main refinancing rate at 4.25 percent two days later, according to forecasts of economists surveyed by Bloomberg News.

Weaker Pound

The pound fell to $1.9727, the lowest level since July 10, as an index of British manufacturing dropped in July to the weakest since December 1998. The Bank of England is forecast to hold its target rate at 5 percent on Aug. 7.

``Sterling at current levels is a good sell,'' said Meg Browne, a senior currency strategist at Brown Brothers Harriman & Co. in New York, in an interview on Bloomberg Television.

The Aussie dropped 2.6 percent this week after touching 93.02 cents yesterday, the lowest since May 2, as PricewaterhouseCoopers and the Australian Industry Group said the manufacturing index fell to 46.9 in July. The Reserve Bank of Australia will keep its cash target at 7.25 percent on Aug. 6, according to the median forecast of 24 economists.

New Zealand's currency, known as the kiwi, decreased 2 percent after reaching 72.47, the weakest since Sept. 19. A net 43.2 percent of companies expect the economy will worsen over the next 12 months, up from 38.7 percent in June, ANZ National Bank Ltd. reported this week.

U.S. Payrolls

U.S. payrolls shrank in July for a seventh straight month, decreasing by 51,000, matching the previous month's decline, the Labor Department said yesterday in Washington. The median forecast of 79 economists surveyed by Bloomberg News was for a reduction of 75,000. The unemployment rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent.

``The market will start to focus on the rise of the unemployment rate, which could cause concerns about the weakness of the economy,'' said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. ``I'm not ready to call a bottom in the dollar just yet.'' The dollar may weaken to $1.58 per euro in the next couple of weeks, said Reid.

The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed July 31.

The 15-nation euro fell yesterday versus the dollar as Germany's Federal Statistics Office in Wiesbaden said retail sales, adjusted for inflation and seasonal swings, dropped 1.4 percent in June after increasing 0.5 percent in the prior month. The median forecast of 29 economists surveyed by Bloomberg News was for a decrease of 0.5 percent.

Trichet on Rates

ECB President Jean-Claude Trichet said on July 3 that he had ``no bias'' or ``pre-commitment'' after policy makers increased the main refinancing rate a quarter-percentage point.

``We're seeing the European numbers coming up very soft, so that will put pressure on the ECB not to do anything until the end of the year,'' said Alan Kabbani, a senior currency trader at Wachovia Corp. in Charlotte, North Carolina. ``I'm thinking a little bit more positively on the dollar.''

The yen rose to a two-week high of 166.99 against the euro yesterday as slowing global growth prompted traders to pare holdings of higher-yielding assets funded in Japan.

Japan's currency rose to a two-month high of 100.07 per Australian dollar and a four-month high of 77.90 per New Zealand dollar on speculation investors reduced carry trades in which they get funds in countries with low borrowing costs and invest where returns are higher. The target lending rate of 0.5 percent in Japan compares with 8 percent in New Zealand.