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Texaco, like other energy companies, received a big lift from red-hot crude oil and natural gas prices. In its exploration and production business, which is closely tied to commodity prices, the company earned $614 million, more than twice the $226 million it posted last year.
Rivals Exxon Mobil Corp. (NYSE:XOM - news) and Chevron Corp. (NYSE:CHV - news) posted similarly rosy profits in their upstream, or exploration and production, business thanks to some of the strongest energy prices in recent memory. Crude oil prices alone averaged about $28.75 a barrel in the quarter, or more than $10 higher than the same period a year ago, as the Organization of Petroleum Exporting Countries carried through with previous supply cuts.
Natural gas prices were also red-hot during the quarter, averaging about $3.65 compared to $2.25 per million British thermal units in the same period a year ago.
But Texaco was largely unable to pass the soaring costs of crude oil through in its sales of gasoline and other fuels, which took a bite out of its profits in the refining, marketing and transportation business.
``While our refining results have improved in Europe and on the Gulf and East Coasts of the United States, the combination of high crude oil costs and the extremely competitive environment contributed to weak marketing margins in most areas,'' Texaco Chairman and Chief Executive Officer Peter Bijur said in a statement.
In the United States, for instance, Texaco said earnings from its refining and marketing operations fell to $80 million before special items, compared to $111 million under depressed conditions a year ago. The drop marks another blow to Texaco's two U.S. refining and marketing joint-ventures -- Motiva and Equilon -- which have already come under criticism from executives at Texaco and partner Royal Dutch/Shell.
Texaco's international refining and marketing operations also struggled, with profits margins particularly weak in Asia.
While Exxon Mobil said earlier this week that its capital spending would continue to rise over the remainder of the year, taking advantage of the higher cash flow which has accompanied strong crude prices, Texaco gave little indication of future spending plans.
Bijur said only that the company plans to maintain a ''disciplined approach'' to its capital budget through the rest of the year.
In the first six months, however, it said capital and exploratory expenditures rose to $1.8 billion, compared with $1.5 billion in the period last year.
-- cpr (firstname.lastname@example.org), July 27, 2000