Chevron Corp. Friday posted a 112% rise in quarterly net income, its second straight quarter reporting record high earnings, but saw domestic natural gas production and worldwide production of gas and oil continue to decline.

The California-based major reported 3Q2008 net income of $7.9 billion ($3.85/share), up 112% from $3.7 billion ($1.75/share) in 3Q2007. The increased earnings were driven by high crude oil prices, which outweighed hurricane-related expenses. Sales and operating revenues in the third quarter soared to $76 billion compared to $54 billion in 3Q2007.

Chevron’s North American natural gas production was down sharply, dropping 15.6% to 1,431 MMcf/d in 3Q2008 from 1,695 MMcf/d a year earlier. Domestic sales of natural gas were also off, falling to 7,142 MMcf/d from 7,428 MMcf/d a year earlier.

Chevron reported total oil and natural gas production down 5.8% from a year earlier to 2.44 million boe/d, compared with 2.59 million boe/d in 3Q2007. The decline was associated with the impact of higher prices on volumes recoverable under certain production-sharing and variable-royalty contracts outside the United States, as well as production that was shut in during September because of hurricanes in the Gulf of Mexico (GOM). Hurricanes Ike and Gustav caused a decline of approximately 150,000 boe/d in September. In its last earnings release, Chevron reported 2Q2008 total oil and natural gas production down 3.4% from a year earlier to 2.54 million boe/d.

During a Friday morning conference call with analysts, Executive Vice President George Kirkland said Chevron’s 4Q2008 production forecast is estimated at 2.62 million boe/d, “significantly higher than year-to-date actuals.” The estimate was driven by lower prices and the continued ramp-up of capital projects.

U.S. upstream income was $2.2 billion in 3Q2008, increasing about $1 billion from the year-ago period, driven by higher prices for crude oil and natural gas. The benefit of higher prices was partially offset by the impact of lower oil-equivalent production, mainly the result of the hurricane-related production slump in the GOM in September. Hurricane-related expenses reduced 3Q2008 upstream income by about $400 million, according to CEO Dave O’Reilly. Largely offsetting those expenses were gains of about $350 million on asset sales.

The company reported capital and exploratory expenditures (capex) of $5.5 billion for 3Q2008, compared with $5.2 billion a year earlier.

“Our disciplined capital spending and tight control over costs remain extremely important in today’s uncertain economic climate,” O’Reilly said. “Our strong balance sheet enables Chevron to continue investing in attractive projects that increase the production of oil and gas and improve the efficiency of our refinery network.”

Chevron, which is the largest leaseholder in the GOM, said two of its deepwater platforms, Blind Faith and Tahiti, were left relatively unscathed by September’s hurricanes. Ike disrupted commissioning activities at the $1.4 billion Blind Faith facility, but there was no damage and first oil is anticipated in November, Kirkland said. Blind Faith, which is expected to have production capacity of 45,000 MMcf/d of natural gas and 45,000 b/d of crude oil, was previously scheduled to ramp up by the end of June, but a problem with the mooring lines delayed commissioning (see NGI, May 5).

The $4.7 billion Tahiti project sustained minor damage during Hurricane Ike, but it remains on schedule and Chevron anticipates first oil by 3Q2009, Kirkland said. Tahiti, which had been scheduled for ramp-up in the first half of this year, was delayed in 2007 because of metallurgical problems in the mooring shackles (see NGI, July 2, 2007). Tahiti’s peak production is projected to be 125,000 b/d of oil and 70 MMcf/d of gas.

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