Like many of its peers, ChevronTexaco Corp.’s quarterly earnings exceeded those from a year ago, but with gains of only 4.5%, the numbers failed to impress analysts. The company, which is counting on a coming merger with Unocal Corp. to boost its oil and natural gas output, reported a 7% decline in its worldwide oil-equivalent production.

First quarter net income rose 4% to $2.68 billion ($1.28/share), from $2.56 billion ($1.20) in 1Q2004. However, analysts surveyed by Thomson First Call had pegged earnings at $1.38/share. Revenue rose to $41.6 billion from $33.65 billion. Upstream earnings from continuing operations rose to $2.38 billion from $1.97 billion a year ago, however, on the downstream side, earnings fell to $409 million from $640 million.

“Quarterly profits for our upstream operations again benefited from strong prices for both crude oil and natural gas,” said CEO Dave O’Reilly in a press release. “Our downstream earnings in the quarter, however, were adversely affected by the impacts of planned and unplanned downtime at several of our refineries.”

U.S. exploration and production income was $767 million, down $93 million from a year ago. U.S. net oil-equivalent production declined 18% to 719,000 boe/d. The liquids component was down 15%, and net natural gas production averaged 1.6 Bcf/d, down 22%. Excluding sales and Hurricane Ivan’s effects, U.S. production fell 8%.

Internationally, production volumes were down on higher crude prices that triggered provisions of joint-production deals. As crude prices increase, ChevronTexaco is entitled to smaller volumes.

ChevronTexaco agreed to acquire rival Unocal for $16.8 billion a few weeks ago (see Daily GPI, April 5). It justified the price by noting that the El Segundo, CA-based producer offered a set of “unique” assets. Combining the companies will make ChevronTexaco a top producer in both Asia and in the Gulf of Mexico.

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