SAN RAMON -- Lower profit margins in Chevron's refinery operations wiped out the benefits of a healthy rise in the energy giant's production of oil and natural gas during its third quarter, the company reported Friday.

Chevron earned $4.95 billion, or $2.57 a share during the quarter, which ended Sept. 30. Profit fell 5.7 percent from the year-ago quarter, when Chevron earned $5.25 billion.

"There are no major disappointments with Chevron's results," said Pavel Molchanov, an analyst with Raymond James. "Refining margins were down, but refining is down for the entire industry. The good news is that production is up."

Profit from Chevron's downstream units, which include refinery and retail operations, totaled $380 million in the third quarter, down 44.8 percent from a year ago.

Upstream operations, which consist of exploration, development and production, totaled $5.09 billion in the quarter, down 0.9 percent from the year-ago quarter.

"We continue to make good progress on our major capital projects," Chevron CEO John Watson said in a prepared release. "Construction continues, and important milestones are being reached on our Gorgon and Wheatstone LNG projects in Australia."

Those projects have helped Chevron bolster oil and natural gas production and outperform rivals such as Exxon Mobil on that score.

San Ramon-based Chevron produced the equivalent of 2.59 million barrels of oil per day from its oil and natural gas fields during the July-September period, up 2.8 percent from the year-ago quarter. Exxon reported this week that oil and natural gas output rose 1.5 percent in the third quarter.


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Chevron is spending cash at record levels on construction and exploration, including new drilling facilities, offshore platforms and other capital projects. In late 2012, it estimated it would spend $36.7 billion during 2013 on major new projects, but that number now looks low.

"While there are still some large uncertainties on timing, we presently anticipate our 2013 capital and exploratory investments will be around 10 percent higher than our original target for the year," Patricia Yarrington, Chevron's chief financial officer, said during a conference call with analysts.

The company's stock fell 1.6 percent to close at $118.01 Friday after the earnings were announced. Investors appeared uneasy because Chevron signaled during the conference call that spending on major projects could flatten temporarily once Chevron has completed its spending on the liquefied natural gas projects in Australia.

"The last two quarters Chevron hasn't hit any home runs, but they also are not striking out," said Brian Youngberg, an analyst with Edward Jones. "Chevron has very good growth prospects. Once the Australia projects begin production, they should be able to grow production in the 5 percent range."

Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.