Posted on: Friday, November 1, 2002

ChevronTexaco loses $904 million for quarter

By Jim Kennett
Bloomberg News Service

SAN FRANCISCO — ChevronTexaco Corp., the oil company created by Chevron Corp.'s acquisition of Texaco Inc. last year, posted a third-quarter loss of $904 million as it wrote down the value of its stake in Dynegy Inc.

The loss equaled 85 cents a share, compared with estimated combined earnings of $1.27 billion, or $1.19 a share, in the same period a year earlier, the company said in a statement. Revenue declined 2.4 percent to $25.4 billion from $26 billion.

ChevronTexaco wrote down the value of its 27 percent holding in Dynegy by $1.55 billion. Shares of the energy trader, which is selling assets to avoid bankruptcy, have fallen 97 percent this year and may fall to zero because its viability is "tenuous," Prudential Financial analyst Carol Coale said yesterday.

The Dynegy write-off "was the big bullet here," said Tim Ghriskey, who holds shares in ChevronTexaco at his $100 million fund at Ghriskey Capital Partners LLC.

"They will likely write down the rest in the fourth quarter. It'll be a done deal."

Earnings also were hurt by a slump in refining as prices fell amid declining demand for jet fuel, a sluggish economy and high inventories of heating oil and other products, it said.

Operating profit from making and selling fuels fell 84 percent to $92 million, with profits in the United States plunging 92 percent to $35 million as prices for refined products couldn't keep up with rising crude oil prices. Third-quarter oil prices were up 6.2 percent on the New York Mercantile Exchange.

Oil production slipped 1.5 percent, while gas production fell 9 percent in the three months through September.

Storms cost ChevronTexaco $25 million by damaging offshore platforms and cutting production by 9,000 barrels of oil and 49 million cubic feet of natural gas, the company said.

The writedown in Dynegy's value included $149 million for Chevron's share of a money-losing pipeline sale that Dynegy made in August to raise cash quickly, and $305 million for its share of Dynegy's own writedown of asset values this quarter.

At the end of the quarter, Chevron valued its stake in Dynegy at $112 million in common stock and $300 million in preferred shares. A further writedown be required, the company said.

It's the second time ChevronTexaco has reduced the value of it's the holding. Last quarter, it cut the value by $531 million.

The writedown was part of $2.14 billion in one-time costs during the third quarter, ChevronTexaco said. The No. 2 U.S. oil company also wrote down the value of other assets by $485 million and had $73 million in merger expenses.

Without these, profit would have been $1.24 billion, or $1.17 per share, the company said.