Oil Futures Falter As Chevron Disappoints

Published on Friday, 27 January 2012 17:27 Written by Todd Shriber

New York, January 27^th  (TradersHuddle.com) – With OPEC member Iran inching closer to a possible ban on crude exports to the European Union, oil futures were mixed to close the week with NYMEX-traded crude off 14 cents to close at $99.56 per barrel. Brent crude add 67 to settle at $111.46 per barrel in London. The U.S. Oil Fund (NYSE: USO) and the U.S. Brent Oil Fund (NYSE: BNO) both finished slightly lower on the week.

It was a mixed day for oil equities as well. Dow component Chevron (NYSE: CVX), the second-largest U.S. oil company, fell almost 2.5% after the company’s fourth-quarter results missed Wall Street estimates thanks to losses in the company’s downstream operations. Chevron reported a fourth-quarter profit of $5.12 billion, or $2.58 a share, compared with $5.3 billion, or $2.64 a share, a year earlier. The company said global output fell to 2.64 million barrels of oil equivalent a day, from 2.79 million barrels. Analysts expected a profit of $2.86 a share and production of 2.65 million barrels per day.

Chevron CEO John Watson said his company plans to use its $10 billion cash hoard for major liquid natural gas projects overseas and to reward shareholders through dividends and share repurchases. Watson added a major acquisition probably isn’t in the cards for his company.

Shares of embattled Transocean (NYSE: RIG), gained almost 2% on volume that was nearly doubled the daily average after a U.S. federal judge ruled BP (NYSE: BP) would have to indemnify Transocean for third-party claims related to the 2010 Gulf of Mexico oil spill. Analysts and investors viewed the news as a victory for Transocean, the world’s largest provider of offshore drilling services.

However, on Thursday evening, Brazilian authorities said they might pursue criminal charges against Chevron and Transocean employees in addition to an $11 billion civil suit against the companies for their roles in a November spill off Brazil’s coast.

BP’s U.S.-listed shares fell 2.4% on stronger-than-average volume on news the British oil giant will not be able to deflect $15 billion in spill costs to Transocean. BP, which is up almost 5% year-to-date, appears to be finding support around $43. The shares currently yield 3.7%.

The oil earnings parade continues next week when Dow component Exxon Mobil (NYSE: XOM), the largest U.S. oil company, steps into the earnings confessional Tuesday morning before the bell. Services providers Cameron International (NYSE: CAM) and National Oilwell Varco (NYSE: NOV) both report on Thursday morning as drilling contractor Diamond Offshore (NYSE: DO).

Regarding Exxon, it would not be surprising to hear the company say refining margins crimped fourth-quarter profits, but investors may be appeased if the company can forecast increase oil output this year and/or pledge to reduce natural gas production. Exxon is also the largest U.S. natural gas producer.