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SAN RAMON, Calif., and EL SEGUNDO, Calif. -- Chevron Corp.'s second-quarter profit fell 11 percent, but topped analyst expectations, a positive surprise that could boost its stock and improve its bidding position in the takeover battle for Unocal Corp., according to the Associated Press.
The San Ramon-based company said Friday that it earned $3.68 billion, or $1.76 per share, for the three months ended June 30 compared with net income of $4.13 billion, or $1.94 per share, at the same time last year.
Asset sales and tax benefits provided an $800 million lift to last year's results.
Revenue for the period totaled $48.3 billion, a 26 percent increase from $38.2 billion last year.
This year's quarterly earnings topped the mean estimate of $1.69 per share among analysts surveyed by Thomson Financial.
Exceeding those expectations was especially important for Chevron in this quarter as the company tries to prevail over China's government-owned CNOOC Ltd. in a bidding battle for Unocal.
Unocal's board is recommending that its shareholders accept Chevron's bid -- valued at $17.3 billion, or $64.02 per share through Thursday -- but CNOOC is still trying to overcome U.S. political opposition to win out with its all-cash bid of $18.1 billion, or $67 per share. A vote of Unocal shareholders is scheduled Aug. 10.
Anything that causes Chevron's stock to rise would help narrow the gap between the two offers because 60 percent of the Chevron bid consists of the company's stock.
In a statement, Chevron chairman Dave O'Reilly hailed the company's strong results, despite refinery outages that prevented the company from fully capitalizing on high oil prices.
“I also look forward with much anticipation to the merger with Unocal and being able to combine the strengths of these two fine companies,” O'Reilly said. “At this year's midpoint, the conditions are excellent for us to continue to adding value for our stockholders.”
Unocal Corp. also did well in the second quarter, with net earnings of $475 million, or $1.73 per share (diluted) -- a 39 percent increase over $341 million, or $1.25 per share (diluted), reported in the same period a year ago. The net earnings, the highest quarterly level in the company's history, included a number of special items in connection with Unocal's adjusted after-tax earnings, the company reported.
Unocal's preliminary adjusted after-tax earnings for the second quarter 2005 were $488 million, or $1.77 per share (diluted). This compares with the Thomson/First Call mean of analyst estimates (published July 25, 2005) of $1.63 per share. In the second quarter 2004, Unocal's adjusted after-tax earnings were $231 million, or 86 cents per share (diluted). In the first quarter 2005, Unocal's adjusted after-tax earnings were $441 million, or $1.62 per share (diluted). Adjusted after-tax earnings are net earnings excluding special items (discussed below) and the cumulative effect of accounting changes.
"Unocal recorded another quarter of strong earnings as the company increased worldwide crude oil and natural gas production and benefited from continued strong crude oil and natural gas prices and lower interest expense," said Charles R. Williamson, Unocal chairman and chief executive officer. "We initiated production from the final two major projects in our 2005 development pipeline -- K2 in the deepwater Gulf of Mexico and the oil expansion project in Thailand."
Unocal's second quarter 2005 adjusted after-tax earnings (compared with 2Q 2004) reflected higher worldwide crude oil and natural gas prices, higher international production, lower exploration and dry hole costs and lower interest expense. These positive factors were offset partially by lower North America natural gas production.
In the second quarter 2005, after-tax special items included a $12 million after-tax gain from the sale of Unocal's 76 Seadrift LLC subsidiary. This gain was offset by $25 million after-tax charges for environmental and litigation provisions.
Unocal currently expects worldwide average production for the full-year 2005 to exceed 430,000 BOE per day, compared with 440,000 BOE per day that was previously estimated. The change reflects the expected loss of production from the planned sale of Unocal's Northrock subsidiary in the third quarter 2005.