Chevron projects strong 2Q despite refining loss

FILE ** In this March 28, 2006 file photo, the Discoverer Deep Seas drill ship sits on station off the coast of Louisiana as Chevron drills for oil in the Gulf of Mexico. If oil or natural gas deposits are found in the newly opened region off Florida's Panhandle, experts say it could further the push to explore other once-protected areas everywhere. (AP Photo/Alex Brandon, File)

SAN FRANCISCO—Chevron Corp. on Thursday projected a second-quarter loss from refining and selling fuel despite record-high gasoline prices that have been draining household and business budgets.

Based on preliminary figures released Thursday, Chevron indicated it lost about $250 million in its so-called "downstream" operations that deliver gasoline to the retail pumps.

But the setback in that division isn't expected to leave a major dent in Chevron's total profit for the quarter ending in June. That's because the biggest arm of Chevron, its "upstream" operations, milked the soaring price for crude oil -- the main ingredient in gasoline.

Chevron sold crude oil for an average of $109.19 per barrel during April and May, an 85 percent increase from last year's second quarter.

The San Ramon-based company didn't provide an estimate for its overall profit during the quarter.

Analysts, on average, expect Chevron to earn $3.44 per share excluding extraordinary costs, according to Thomson Financial. The forecast translates to a profit of about $7 billion, which would be a new record for the 129-year-old company.

Chevron is scheduled to release its second-quarter results Aug. 1.

Investors seemed mildly disappointed with the first glimpse at the second-quarter numbers, which Chevron put out after the stock market closed. Chevron shares dipped 50 cents in extended trading after closing at $96.25, up $2.34, in the regular session.

This will mark the second straight quarter that Chevron's downstream performance has eroded, reflecting a paradox that has emerged during this year's sharp run-up in gasoline prices.

Chevron also buys some of the oil that it feeds its refineries, making it more difficult to make money selling gasoline if it can't raise the fuel's retail price fast enough to keep with up the company's escalating expenses.

The company says that problem is squeezing its profit margins especially hard on the West Coast, even though gasoline prices there have climbed higher than $4.50 per gallon in many markets.

But Chevron's downstream operations were faring better when gasoline prices were still hovering around $3 per gallon. In last year's second quarter, for instance, Chevron's downstream operations earned $923 million, excluding a gain from the sale of some Netherlands holdings.

Chevron said outages at refineries in Mississippi and the United Kingdom also hurt its downstream divisions in the most recent quarter.