Chevron Corp. warned investors last week that its second quarterearnings will take a hit from severance costs related to 2,500 jobcuts and a recent fire at its Richmond, CA, refinery.
CEO Kenneth Derr announced the job cuts associated with a $500million cost-cutting program would result in a $150 million chargeagainst its second-quarter earnings. The job losses representslightly more than 7% of the company’s 33,700-member workforce, butare far more than the roughly 1,000 cuts it originally planned latelast year. Derr said the March fire at its 240,000 barrel-per-dayrefinery would shave $100 million from second quarter earnings.
Despite the warning, however, Chevron share prices actuallymarched higher on Wednesday following the announcement, posting a$2.50/share gain on the day. Chevron shares were losing some groundon Friday, but the announcement failed to pull the rug out fromunder its stock.
Part of the reason was a 70 cent gain in crude futures to$18.45/bbl Wednesday. But Derr also made a good presentation toanalysts, forecasting significant production improvements this yearand an improving return on capital.
Chevron expects to meet its volume growth targets of 8-9% forinternational liquids and 4-4.5% for worldwide production on an oilequivalent basis, he said. The production growth will help it meetthe 12% return on capital employed that Chevron expects will put itin the No. 1 position among its peers in total shareholder returnover the next four years.
The company recently broke off merger talks with Texaco Inc. butDerr said the company remains on the watch for key assets and willbe able to compete effectively against the “supermajors” byincreasing production and reducing costs.
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