SAN RAMON, Calif. – Chevron Corp. on Friday reported the highest quarterly and annual profits in its 126-year history, refocusing attention on the high fuel prices that have enriched the oil company’s shareholders and exasperated consumers paying more to fill their gasoline tanks and heat their homes.
The San Ramon, Calif.-based company’s fourth-quarter earnings rose 20 percent to $4.14 billion, the most it has made in any three-month period since its inception in 1879. The performance topped the $4.13 billion earned during the second quarter of 2004 – the early stages of a two-year boom.
Chevron’s profit of $14.1 billion for the full year also was a company record. It now has posted record annual profits in each of the last two years, earning a combined $27.4 billion.
Oppenheimer &Co. Fadel Gheit believes Chevron will set yet another new earnings record this year as the company continues to mine crude oil prices that are expected to remain above $60 per barrel.
“We are only scratching the surface,” Gheit said. “In my view, this company is hitting on all cylinders.”
The windfalls that Chevron has been generating aren’t unique in its industry. Exxon Mobil Corp., the world’s largest publicly traded oil company, earned nearly $10 billion in the third quarter and its profit for the entire year is expected to surpass $35 billion when it releases its fourth quarter results Monday.
While the oil industry’s recent prosperity has pleased Wall Street, it has raised hackles in Congress, where some lawmakers have recently threatened a windfall profit tax to prod companies to spend more money to increase production.
Sen. Barbara Boxer, a California Democrat who attacked Chevron Chairman David O’Reilly and other oil industry executives when they appeared before Congress in November, lashed out again Friday.
“I call on the Bush Administration and the Federal Trade Commission to put an end to this price gouging,” Boxer said. “You’d think FTC stood for ‘Friend to Chevron’ with the way they sit back and let these companies gouge consumers.”
Chevron and its rivals maintain that any punitive measures taken against the industry ultimately will do more harm than good, exacerbating the recent market conditions that have driven up energy costs.
Consumer activists, though, insist a government crackdown is long overdue.
“These aren’t just windfall profits; they are hurricane-force profits,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, a watchdog group that has railed against the oil industry for years.
The backlash has put Chevron and its rivals on the defensive as they try to dispel perceptions that their soaring profits are unconscionably high.
The U.S. oil and gas industry cites independently gathered data showing its profits average about $8 per $100 in sales – well below banking, pharmaceutical and high-tech companies, which all make an average of at least $15 per $100 in sales.
Chevron and other oil companies also are emphasizing that they plan to spend substantially more during 2006 on the exploration for more oil – a search that ultimately could increase supplies and reduce the pressure to raise energy prices even further.
Chevron’s latest quarterly profit, translating to $1.86 per share, compared with net income of $3.44 billion, or $1.63 per share, in the comparable 2004 period.
Revenue totaled $53.8 billion, a 26 percent increase from $42.7 billion in the comparable 2004 period.
Despite the robust gains, the quarterly earnings fell 3 cents below the average estimate among analysts polled by Thomson Financial.
Chevron’s shares gained 16 cents to close at $60.38 on Friday on the New York Stock Exchange. Chevron’s stock price still has increased by 40 percent since the end of 2003, creating more than $40 billion in shareholder wealth.
For all of 2005, Chevron’s $14.1 billion profit amounted to $6.54 per share, topping its previous highest annual profit of $13.3 billion, or $6.14 per share, established in 2004.
Last year’s gains partially reflect Chevron’s increased size after completing a $17.8 billion takeover of Unocal Corp. in August.
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