Chevron Corp and Total posted higher profits on Friday, the latest two major oil companies lifted by pricier oil and rosier refining conditions, even if increasing oil and gas production remains a struggle.
The third-quarter earnings from Total and Chevron capped a week that saw big profit gains at Exxon Mobil Corp, Royal Dutch Shell Plc and BP Plc as benchmark Brent oil prices hover near $110 per barrel, nearly 50 percent higher than the year-earlier quarter.
Still, oil prices were slightly down from the second quarter, which helped refineries at these integrated oil companies (IOCs) post higher margins and profits.
The IOCs have not typically been getting much credit for better than expected downstream results, energy-focused investment bank Simmons & Co wrote in a note to investors.
Chevron, the second-largest U.S. oil company behind Exxon, said its profits more than doubled, helped by a gain of about $500 million from the sale of its Pembroke refinery to Valero Energy Corp.
Chevron also bumped up its dividend for a second time this year, reflecting a strong cash position.
Citigroup said big capital expenditure commitments were weighing on its European competitors' cash flows, but expected free cash flow to grow for some of them next year.
For its part, Chevron said on Friday that its 2012 capital and exploratory (C&E) budget would show a noticeable increase from the $26 billion it expects for this year.
We have indicated previously that our medium-term C&E requirements would be robust, a direct result of having such a healthy and, frankly, enviable development queue, Chief Financial Officer Pat Yarrington said on a conference call.
Total's third-quarter profit rose 24 percent, meeting market expectations, as its output fell by 1 percent because of disruptions in Libya.
Chevron saw a drop in output to 2.6 million barrels of oil equivalent per day (bpd) from 2.74 million a year before. Based on its outlook, Yarrington said it was fair to expect 2011 production light of Chevron's 2.73 million bpd forecast.
Chevron had already said in July that a slower Gulf of Mexico project ramp-up and a Thai pipeline problem would trim its 2011 production by about 30,000 bpd.
Occidental Petroleum Corp, the fourth-largest U.S. oil company, represents an alternative bet for oil investors as it has no refining like the IOCs, but it has aggressively pushed for production growth that Barclays Capital said on Friday had led to negative cash flow in the past six quarters.
Yet shares of Occidental rose another 2 percent on Friday, following a 10 percent jump a day earlier in response to its stronger-than-expected results.
Chevron and Total, like their IOC peers, have struggled to increase oil production in recent years.
Disappointment about this has weighed on oil stocks, and Total in particular has been punished by investors -- until a rally that has lifted its stock 27 percent since September 26, when it raised its 2010-15 average output goal to 3 percent per year from 2 percent.
Chevron is sticking with long-term production growth targets of 1 percent through 2014, and then 4 percent to 5 percent in the three years after that, driven by Gulf of Mexico and Australian output.
Assuming oil prices of $100 a barrel, oil companies offered attractive long-run value, said analyst Kurt Wulff at McDep Associates. But investors would like to see a little growth, and that's hard to come by with the very big companies.
Total has made over $10 billion of acquisitions in the past 18 months, expanding its geographical footprint beyond its historical heartland of Africa to Australia, Canada and Russia.
Shares in Total fell about 2 percent in Friday trading, while Chevron shares climbed 0.6 percent to $109.64 -- within sight of its record high of $110 touched on Thursday.
(Reporting by Marie Maitre in Paris, Braden Reddall in San Francisco and Matt Daily in New York, editing by Dave Zimmerman, Gerald E. McCormick and Tim Dobbyn)