With global demand for oil and gas rising ever faster, and major energy companies worldwide operating in increasingly difficult and hazardous conditions, investors seem hard-pressed to distinguish one major oil producer from another. Few of us could recite the differences between, say, ExxonMobil
To start telling the ranks of Big Oil apart, let's examine Chevron, our nation's second-largest oil and gas company, and a major force in energy production worldwide. The company, headquartered in relatively isolated San Ramon, Calif., weighed in Friday with its latest quarterly results.
Sound results
By most standards, Chevron enjoyed a solid quarter. It raked in $5.38 billion in net income -- $2.52 per diluted share. That's a 23.7% improvement from last year's $4.35 billion, or $1.97 a share.
However, the company's June numbers were boosted by a $680 million gain from the sale of power wholesaler Dynegy. Including in a $169 million one-time loss, the company's per-share results for the quarter would otherwise have been $2.27 billion.
At an average 2.63 million barrels per day, the company's crude-oil production still represented a 1% drop year over year. Nevertheless, higher gasoline prices helped refining and marketing earnings improve 30% to $1.3 billion, up from $998 million a year ago.
A light, sweet history
All in all, it was a reasonably solid quarter for a company whose history dates all the way back to 1876. Oil was discovered that year at Pico Canyon in the Santa Susana Mountains, north of Los Angeles. The discovery came only a couple of decades after Colonel Drake ostensibly discovered oil in northern Pennsylvania. Three years after the Pico discovery, Chevron's first predecessor, the Pacific Coast Oil Company, was formed.
Much of Chevron's existence unfolded under the Standard Oil of California moniker, although the modern company also includes Gulf Corporation, which Chevron bought for $13.3 billion in 1984. Finally, in a major 2001 merger, Chevron combined with Texaco, which itself had been founded back in 1901 as the Texas Fuel Co. Texaco brought along the Getty Oil assets, obtained in another 1984 acquisition.
The new company was called ChevronTexaco until two years ago, when it acquired Unocal Corporation and again became Chevron. Texaco and Chevron were hardly strangers, though; in the 1930s, they had teamed up to form both California Texas Oil and what is now Saudi Aramco, the world's largest oil company.
Setting a standard
The third-largest hydrocarbon producer in the U.S., Chevron operates in more than 20 countries. In 2006, it produced 2.67 million barrels of oil equivalent per day, roughly 70% of which originated outside the United States. Its global refining capacity can process more than 2 million barrels of oil daily, and its worldwide marketing network includes about 25,800 retail outlets in 75 countries.
In the Gulf of Mexico, the company has partnered with Statoil
Internationally, Chevron's most notable areas of activity are Saudi Arabia, Russia, Angola, Nigeria, Kazakhstan, and Canada. In Saudi Arabia, the company made the nation's first oil discovery in 1938 at Dammam Dome No. 7, a decade before others found the huge Ghawar field.
In Russia, Chevron is a 15% investor in the 935-mile CPC pipeline, which links the giant Tengiz Field in Kazakhstan with the Black Sea marine terminal Novorossiysk-2 in Russia. The company also is a partner in that same Tengiz field, the world's deepest operating supergiant oil field.
In the downstream (refining) area, Chevron operates 20 fuel refineries, five of which -- in Singapore, Thailand, South Korea, and a pair in California -- are "core refineries," along with two other units at Pascagoula, Miss., and Pembroke, U.K.
A glimpse at the numbers
Let's compare Chevron's financials to those of fellow U.S. oil firms ExxonMobil and ConocoPhillips:
|
Company |
Forward 2007 P/E |
Operating Margin |
Dividend Yield |
|---|---|---|---|
|
Chevron |
10.5 |
14% |
2.7% |
|
ExxonMobil |
12.2 |
16.6% |
1.6% |
|
ConocoPhillips |
8.5 |
11.5% |
2.1% |
I don't know about you, Fools, but given Chevron's mix of international operating locations, its P/E discount to Exxon, its solid balance sheet, and its relatively generous dividend history, I find this company more than a little intriguing.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool's disclosure policy prefers the term "Texas tea."
