Chevron Corp, the second-largest U.S. oil company, said its quarterly profit dropped 32 percent and posted a modest production outlook for this year despite surging capital spending, sending shares down sharply on Friday.
Like Exxon Mobil, Royal Dutch Shell and other international energy giants, Chevron has tried to offset declining production at its oil and natural gas wells by spending massively on new exploration projects.
Chevron spent $41.9 billion last year on capital and exploration projects, a 23 percent increase from 2012.
Despite the higher spending, oil and natural gas production fell 3.4 percent to 2.6 million barrels of oil equivalent per day (boe/d) in the quarter.
Chevron said rising production in the United States and Nigeria wasn’t enough to offset declining production at legacy fields around the world.
For 2014, Chevron expects total production of 2.6 million boe/d, up only 0.5 percent from 2013 levels. The estimate missed Wall Street’s expectations and disappointed investors, who had hoped 2014 would be a “positive transition year” toward 2017 when new projects come online, Credit Suisse analyst Edward Westlake said in a note.
Chevron shares fell 3.6 percent to $112.31 in morning trading.
Looking forward, Chevron said it has made “significant progress” on those growth projects, including two massive liquefied natural gas projects in Australia and deepwater wells in the U.S. Gulf of Mexico.
“Major capital projects currently under construction are expected to deliver significant production growth and shareholder value in the years ahead,” Chief Executive John Watson said in a statement.
The company reported net income of $4.93 billion, or $2.57 per share, compared with $7.25 billion, or $3.70 per share, in the year-ago period.
The quarterly profit met expectations of Wall Street analysts, according to Thomson Reuters I/B/E/S.
In refining, profit plunged 58 percent due to shrinking margins, largely due to price differentials between different types of crude oil.
Refiners make more money when the price difference between various types of crude oil is wide. When the gap narrows in the price differences, costs tend to rise. Exxon on Thursday posted weakness in its own refining unit.
Profit also fell in Chevron’s smallest unit, the power generation and mining unit.
