Chevron Corp.'s first-quarter profits and revenues plummeted, undermined by lower crude-oil and natural gas prices, but analysts believe the company is poised to rebound because of its aggressive quest to scout for new sources of energy.
San Ramon-based Chevron earned $1.84 billion for the January-March quarter. That was down 64 percent when compared with the same quarter the year before. The results marked the smallest level of quarterly profits for Chevron in five years.
«This is consistent with what we're seeing throughout the energy sector, 50 to 60 percent declines in earnings across the board," said Gianna Bern, president of Brookshire Advisory and Research, which tracks the energy sector.
The recession has eroded the appetite for energy consumption by consumers and businesses alike.
„It's a function of the economy," said William Andrews, a senior vice president and analyst with investment firm C.S. McKee LP. «I don't think Chevron will have a good quarter this year. It's really going to be 2010 before things turn around.“
Oil production and refinery inputs both were higher than a year ago and operating expenses were lower, said David O'Reilly, Chevron's chief executive officer.
«Operationally, we had an excellent quarter," O'Reilly said.
But the nosedive in oil and natural gas prices triggered sharply lower earnings for Chevron's upstream business, which consists of exploration, production and development.
Profits for Chevron's downstream, or refining and marketing operations, improved primarily because of gains on assets sales. Margins on the sale of refined products improved only slightly from the depressed levels of the first quarter of 2008, Chevron said.
Still, industry watchers believe that it's the future that holds significant promise for Chevron. In recent years, the company has scoured the globe for numerous projects that could let it produce more crude oil and natural gas.
„If you look at all the oil majors, we think that Chevron has the best exploration program," Andrews said.
Particularly promising, analysts said, are Chevron's deep-water fields in the Gulf of Mexico and Brazil, as well as a liquefied natural gas field off western Australia. The oil fields in Kazakhstan also hold plenty of potential.
These projects each could produce 100,000 to 150,000 barrels of oil a day.
«That's significant," Andrews said. «You get three or four of those going, that's a pretty big bump for Chevron's production.“
The quarterly results contained indications that Chevron has already begun to harvest success from its exploration and production efforts.
Worldwide oil-equivalent production was 2.66 million barrels per day in the first quarter of 2009, Chevron reported.
That was up 64,000 barrels per day from the corresponding 2008 period.
«Although one quarter does not make a trend, we believe Chevron has made a good start here," Paul Cheng, an analyst for Barclays Capital, wrote in a research note. „We continue to think the company should be able to meet or even beat their 2009 production target.“
It appears that investors could be looking down the road as well, rather than in the rear view mirror, when it comes to Chevron's prospects.
The company's shares rose 77 cents, or 1.2 percent, to finish at $66.87 on Friday. That outpaced the 0.5 percent gain for the S&P 500 Index.
«Chevron is really laying the foundation to turn around when we begin to see some light at the end of the tunnel," Bern said.