Chevron Corp. (NYSE: CVX) managed to beat earnings despite a large drop in revenue. The oil giant reported earnings of $3.66 per share, some $0.42 better than the consensus estimate of $3.24 per share. Revenues were down about 9% to $62.61 billion, but the few analysts who issue estimates on revenue were looking for only about $58.4 billion. The real earnings of $7.2 billion in the second quarter’s report compare to $7.7 billion in the second quarter of 2011.

The upstream earnings were $65.62 billion (down from $6.87 billion a year earlier) and the downstream earnings were $1.88 billion (up from $1.04 billion a year earlier). Earnings mainly benefited from improved margins on refined product sales. The news here that is not being reported on aggressively enough is that the refining sector now appears to be in the sweet spot.

The company is trying to remain positive. Chairman and CEO John Watson said:

Our second quarter earnings and cash flow were among our strongest ever, even with softer oil markets. Despite current weakness in the global economy, we continue to invest in our long-term growth projects to help deliver affordable energy to meet future demand. We took several important steps to advance our major upstream capital projects, in particular achieving milestones in our natural gas development projects in the Asia-Pacific region. We also expanded our global exploration resource acreage, including new leases in the Gulf of Mexico where we already hold a significant position.

Chevron also said that it spent some $1.25 billion to repurchase shares of its common stock in the second quarter 2012 under its share repurchase program. The oil giant ended the quarter with some $21 billion in cash on hand.

We are seeing a very mixed bag in the refining sector this morning after Chevron basically talked up the refining operations. Hess Corp. (NYSE: HES) is up 0.5% at $47.83 against a 52-week range of $39.67 to $70.03. Valero Energy Corp. (NYSE: VLO) is down 0.4% at $25.40 this morning. Phillips 66 (NYSE: PSX) is indicated lower by less than 1%. Marathon Oil Corp. (NYSE: MRO) is currently indicated flat after a $26.30 close on Thursday.

As far as the primary move, Chevron shares are up 0.7% at $109.00 right before the open, against a 52-week trading range of $86.68 to $112.28.

JON C. OGG

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