Former underdog ChevronTexaco ( CVX) is starting to look like big oil's hottest star. After a series of misfires -- including a disastrous shot at energy trading -- ChevronTexaco jumped past some sizzling competitors to deliver the biggest upside surprise of the quarter. The energy giant, which became the nation's second-largest oil company through a merger in 2001, reported first-quarter profits of $1.99 per share that toppled Wall Street expectations by 18 cents. All together, the company reported first-quarter profits of $1.92 billion that more than doubled profits of $725 million one year ago. The stock jumped $1.10 to $64.10 on the news. "They had everything going against them last year," said Fahnestock analyst Fadel Gheit, who recommends buying the stock and owns shares in the company himself. "But now, they're firing on all cylinders. They did much better than the other majors."
West Is BestLike its competitors, ChevronTexaco benefited from soaring energy prices pushed higher by the war in Iraq and disruption in Venezuela. But the company's success was amplified by its industry-leading leverage to both energy prices and refinery margins in the West Coast. Those same focuses, combined with a doomed foray into energy trading, hammered ChevronTexaco during the unfavorable conditions that followed the company's merger. A year ago, Gheit said, ChevronTexaco was reeling from hurricane damage in the Gulf of Mexico, government blackmailing in foreign locations and -- most notably -- a bad $3 billion bet on energy trader Dynegy ( DYN). "Investor confidence has been shot," he admitted. "Hopefully, they're on the right track now." CEO Dave O'Reilly insists that's the case. He pointed to ChevronTexaco's recent quarter as evidence of a turnaround. "The first quarter's financial results were the best since our merger in late 2001," O'Reilly said. "Taken together, the first quarter financial results, our recent operational successes and the longer-term initiatives combine to underscore our company's solid foundation and the significant potential to create value for our stockholders."