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Chevron says its first quarter profits will be sharply lower

NEW YORK  — Chevron Corp. said Thursday its earnings will be sharply lower for the first quarter due to falling oil and natural gas prices.

Like the entire industry, Chevron, the second-largest U.S. oil company, has struggled with wide swings in crude prices. Benchmark crude soared to more than $147 a barrel last year before plunging below $35 this year.

For the first quarter, Chevron's results will include charges of about $100 million in write-offs related to exploration. It also expects gains of about $350 million from sales of its fuels-marketing business in Brazil and Nigeria.

The company also said its quarterly after-tax charges for corporate and other activities will range between $250 million and $350 million.

During January and February, production of oil and natural gas increased to 660,000 barrels per day, up from 619,000 barrels per day in the fourth quarter. Chevron said the jump in production was primarily due to the restoration of operations in the Gulf of Mexico following last year's hurricanes.

The San Ramon, Calif.-based company issued the guidance to summarize market conditions for the three-month period between January and March. It didn't provide any specific earnings projections for the first quarter, but Wall Street expects its results to be the worst of the year.

The average earnings estimate among analysts surveyed by Thomson Reuters is 94 cents a share, less than half the $2.48 per share that Chevron earned in the first three months of 2008.

Chevron is scheduled to report first-quarter earnings on May 1.

The company also could face a penalty of $27.3 billion as part of a 15-year-old class-action lawsuit. Plaintiffs say that Texaco, which Chevron bought in 2001, polluted large swaths of the Amazon rainforest in Ecuador.

The lawsuit has prompted Chevron's shareholders, including large pension funds, to demand answers about the company's environmental practices overseas. Citing the case in Ecuador, the shareholders say company policy exposes Chevron to "to government sanctions, negative brand publicity, and consumer boycotts."

At its annual meeting on May 26, shareholders are expected to ask Chevron to report back to them about its environmental policies and procedures. The company tried to suppress the request, but the Securities and Exchange Commission said last month the shareholder resolution should be heard.

"Chevron has repeatedly been cited for practices that allegedly have caused environmental damage and harmed the health and welfare of local communities," the shareholder proposal said.

Shareholders say they're concerned about the company's environmental record, and have been especially critical of Texaco's former operation in Ecuador.

The class-action suit includes roughly 125,000 residents from the Amazon River's tainted headwaters who complain about roads drenched with crude, oil-related infections and toxic air.

A court-appointed geological engineer in Ecuador recommended the massive penalty, which would eclipse Chevron's 2008 profit of $23.93 billion, after finding high levels of petroleum hydrocarbons in the area and cancer levels that were nearly double the national norm.

Chevron doesn't deny that the area where Texaco once operated are polluted, but the company says it's not liable. Texaco spent $40 million to clean up the area as part of an agreement with the Ecuador government, and it later was absolved of liability in 1998, company officials said. Chevron also asserts that its former partner, state oil company Petroecuador, continued to pollute the area after Texaco left.

"Texaco's getting blamed for another company's mess," Chevron spokesman Kent Robertson said.

The presiding judge in the case, Juan Nunez, wouldn't comment about the case. However, the plaintiffs' lead attorney, Pablo Fajardo, told The Associated Press on Thursday that a verdict is unlikely before October.

Meanwhile, Chevron has filed several petitions asking the judge to throw out the recommendation for damages, claiming that the court-appointed engineer is being paid by the plaintiffs in the case.

"It's a conflict of interest," Robertson said. "This guy is supposed to be acting independently, but his field staff includes people who stand to benefit from an award."

The company's shares rose 75 cents Thursday to close at $69.23. They've traded in a range of $55.50 to $104.63 in the past 12 months.

Associated Press Writer Frank Bajak in Bogota, Colombia, contributed to this report.

The Trucker staff can be reached for comment on this article at [email protected] .