ChevronTexaco Books Big Gains

ChevronTexaco ( CVX) has just closed the books on the best year in company history.

Helped by record energy prices, the oil major blew past Wall Street expectations on Friday, nearly doubling profits for both the fourth quarter and the full year. The company posted fourth-quarter profits of $1.63 a share, up from 82 cents a year ago, beating the consensus estimate by 23 cents. Full-year profits hit $6.28 a share, including gains from asset sales.

Revenue jumped 39% to $42 billion during the quarter and rose 26% to $151 billion over the course of the year. Net income rocketed 100% and 85% over the same periods, respectively.

ChevronTexaco celebrated the results as the strongest ever in the company's 125-year history.

"Our fourth-quarter performance capped a year of record earnings for our company and reflects the focus on executing with excellence by our thousands of employees worldwide," said CEO Dave O'Reilly. "We've built tremendous financial strength and have a solid foundation of future growth projects. ... I am very optimistic about our company's ability to continue creating value for our stockholders."

During the latest quarter, ChevronTexaco enjoyed significant growth across all of its major business lines. Profits from international exploration and production nearly tripled to $1.3 billion. Meanwhile, domestic E&P earnings more than quadrupled to $959 million. High oil and gas prices more than offset a drop in production volumes.

The company's refining and marketing division also saw explosive growth as a result of higher margins. International refinery profits jumped 28% to $704 million. And domestic refinery profits jumped nearly fivefold to $372 million.

Elsewhere, in the smaller chemicals division, fourth-quarter profits rocketed from $3 million to $75 million with help from high margins on commodity chemicals. And the company's "other" division, which includes its interest in Dynegy ( DYN), swung from a year-ago loss to a fourth-quarter profit of $62 million.

The record earnings enabled ChevronTexaco to further strengthen its financial position over the past year. The company reduced its debt balance by $1.3 billion and its debt ratio from 26% to 20%. It also bolstered its pension plan with a $1.6 billion contribution. In addition, it raised its dividend by 10% -- marking the 17th consecutive year of dividend growth.

Even after all of that spending, the company's cash and marketable securities balance of $10.7 billion is nearly twice as large as it was just one year ago.

To be sure, some experts had expected less. Early this month, for example, Bear Stearns analyst Frederick Leuffer actually lowered his fourth-quarter profit expectation for the company below the consensus estimate to $1.36 a share. Leuffer made a similarly misguided call on ConocoPhillips ( COP), which earlier this week blew past Wall Street expectations as well.

Leuffer rates both super majors underperform because he expects sector earnings to decline some 40% on lower energy prices this year.

In contrast, Prudential analyst Michael Mayer last month raised his expectations for ChevronTexaco. But his new 2004 earnings forecast of $5.65 a share still wound up lower than the company's actual results. Mayer, who has a neutral rating on the stock, is also banking on lower "normalized" energy prices going forward.

Investors are displaying some caution as well. Shares of ChevronTexaco slipped 1.1% to $53.48 despite the company's record year.

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