Chevron Issues Profit Warning

Chevron CVX issued a warning that fourth-quarter profits are expected to be significantly lower, due largely to a fall in Gulf Coast refining margins and lower refinery crude-input volumes. The oil company said that downstream earnings in Q4 2011 will show no growth on the previous quarter, due to weaker profit margins, a loss on foreign exchanges, and higher-than-normal charges for corporate and other activities. In Q3 2011, the firm reported earnings of $7.8 billion, at $3.92 a share, with upstream earnings accounting for $6.2 billion and downstream earnings accounting for $2 billion, thanks to asset sales and higher margins. The firm's U.S. and International refinery volumes have fallen to previous figures. In Q3 2011, the company experienced higher margins thanks to its U.S. West Coast refining operations to $24.45, up from $18.44 in 2010. Now those same margins have plummeted to just $13.62 a barrel. Chevron's stock fell in pre-market trading on the news, and is expected to fall even lower in intraday trading. With the company's recent troubles in South America thanks to an oil spill and Ecuadorian court's judgment against the company, the stock has fallen slightly from its 52 week high of 110.99. There is more room for Chevron to fall, but the company hopes that its international expansion will give investors cause to cheer. With a recent 3.8% increase in the company's quarterly dividend, the stock has remained attractive, and recent expansions plans in the Middle East and South Asia demonstrate room for growth. The lowered expectations might signal a bargain for energy stock investors in the coming days.