(Update adds production volumes figure,analyst comments, fresh share price and background)
By Isabel Ordonez
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Chevron Corp.'s (CVX) profits fell 51.5% as oil and natural gas prices slump in the third-quarter, but the results bested analysts' expectations thanks to a jump in output and a sharp cut in operating costs.
The second-largest U.S. oil company by market value after Exxon Mobil Corp. (XOM) reported Friday a profit of $3.83 billion, or $1.92 a share, down from $7.89 billion, or $3.85 a share, a year earlier. The latest period included 20 cents a share in gains from asset sales and tax items. Revenue decreased 41% to a rounded $47.0 billion. Analysts forecast earnings of $1.47 on revenue of $47.84 billion Thursday.
Quarterly production of the San Ramon, Calf.-based oil major rose 10.6% to 2.7 million barrels of oil equivalent per day, while its year-to-date operating costs fell about 13%. The production increase was driven primarily by the start-up of projects around the world. "The company reported good results across all segments, but most of the earnings beat came in the exploration and production segment on good volumes and lower implied costs," said Mark Flannery, analyst at Credit Suisse, in a note to clients. Chevron is currently by far the major oil company with the strongest volume growth, he added.
Chevron has already warned the market in early this month that production will grow and that earnings will be affected by lower commodity prices. But "nobody expected such impressive increase of production and such a significant cost reduction," said Fadel Gheit, analyst at Oppenheimer & Co. Inc.
The company's shares were trading 0.21%, or 16 cents down to $77.79, in a bad morning for petroleum equities. Chevron's stock is up roughly 5% this year.
But although Chevron's results were better than expected, the company's profits still felt the pinch of lower oil and natural gas prices that also reduced earnings of ExxonMobil and ConocoPhillips by 68% and 71%, respectively.
In the U.S., Chevron's average sales price per barrel of crude oil and in the third quarter was about $60 compared with $107 a year ago. The average sales price of natural gas was $3.28 per thousand cubic feet, down from $8.64 in last year's third quarter. Internationally, Chevron's average sales price for crude oil was $62 per barrel and $3.92 per thousand cubic feet for natural gas.
Chevron's third-quarter exploration and production earnings were $3.64 billion, down 41% from the same period a year ago.
Chevron also echoed the theme of weak refining earnings as margins remained tight during the quarter. Refining and marketing profits dropped 89%. The oil giant's chemical business posted $167 million in profits.
-By Isabel Ordonez; at Dow Jones Newswires; 713.547.9207; isabel.ordonez@dowjones.com
(Tess Stynes in New York contributed to this article)