Texaco Inc. yesterday reported that its third-quarter profits declined 29 percent and Chevron Corp. announced its earnings fell 33 percent in the face of the global oil surplus that depressed refining and marketing results.
Analysts had predicted that the international oil companies would show reduced profits in the July-to-September quarter because the strong U.S. dollar abroad raised local crude oil acquisition costs that could not be recovered in the weak overseas marketplace.
In another blow to the major oil companies, U.S. prices eroded during the peak summer driving season because of excess supplies.
Both companies also had large expenses related to major acquisitions earlier in the year, when Chevron bought Gulf Corp. for a record $13.3 billion and Texaco purchased Getty Oil Co. for $10.1 billion.
In White Plains, N.Y., Texaco -- the third-largest U.S. oil company -- said its third-quarter earnings dropped to $235 million (91 cents a share) from $331 million ($1.28) in the quarter last year. Revenue decreased 7.5 percent to $9.8 billion from $10.6 billion.
Texaco Chairman John K. McKinley said the company's third-quarter performance was "adversely impacted by the continuing worldwide oversupply conditions which have severely depressed operating margins."
He also said that, "At the end of the third quarter, product prices continued to be depressed."
But McKinley said petroleum demand "recovered somewhat" in the third quarter as the economic recovery spread through the major industrial nations.
Texaco had an $87 million loss in the latest quarter on worldwide refining and marketing operations vs. a $55 million loss a year earlier. Exploration and production earnings declined to $377 million from $446 million in the third quarter last year.
Texaco said its lower third-quarter revenue reflected a smaller amount of crude oil purchased for resale and weak product prices.
The company's third-quarter earnings included an after-tax charge of $21 million for special employe separation benefits to be paid because of a cutback in operations at its Port Arthur, Tex., refinery. The latest quarter also included an after-tax gain of $44 million from foreign currency translation vs. a $23 million gain the year before.
Texaco did not break out the interest expenses associated with the Getty purchase, but said its loss from corporate and nonoperating results, which include such expenses, widened to $202 million in the third quarter from a year earlier. And for the first nine months of the year, that loss grew to $442 million from $136 million.
San Francisco-based Chevron -- the fourth-largest U.S. oil company -- had a drop in third-quarter profits to $342 million ($1 a share) from $509 million ($1.49) a year earlier. Revenue was off 5.1 percent to $7.3 billion vs. $7.7 billion.
Chevron Chairman George Keller blamed the earnings decline on continued erosion of the company refining and marketing margin. Chevron's worldwide exploration and production earnings fell to $377 million from $417 million in the third quarter last year.
Chevron's purchase of Gulf added $7 million to third-quarter earnings after taking no financing costs into account.