Markets

Rising Energy Prices to Lift Chevron Profits in 2Q:08

By David Phillips

Updated on: July 11, 2008 / 5:19 PM EDT / MoneyWatch

The Company: Chevron, the second-largest U.S. oil company behind Exxon Mobil
The Filing: Form 8-K filed on July 10.
The Finding: In its interim update for the second quarter, Chevron Corporation reported that upstream (exploration and production) earnings would benefit from an increase in prices for crude oil and natural gas. Expect the overall trend for other oil and gas companies to be positively impacted by rising energy prices, too.

The Upshot: Chairman and Chief Executive David J. Reilly, who earned $31.5 million in compensation in 2007, is well on his way to topping that amount in this year's pay package. Chevron said that the company realized average U.S. crude oil prices of $109.19 a barrel in the second quarter through May, up from an average of $58.89 a barrel in the first-quarter 2007. U.S. natural gas realizations increased $2.86 year-over-year to $9.42 per thousand cubic feet for the second-quarter through May.

The rapid rise in crude oil and natural gas prices will likely lead higher second half earnings, too, with actual margins dependent on derivative positions and actual production volumes.

The Question: Looking for a poster child to blame for failed energy initiatives, how soon before members of Congress again call for a windfall tax on oil profits? And now a message from our sponsor: Like what you've read here? Hate it? Think BNET can be better? Let us know! Email us directly, or take the Help Us Build a Better BNET poll on BNET Intercom.