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Chevron profit tumbles 90 percent, misses estimates; shares drop

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(Reuters) – Second-quarter profit at oil producer Chevron Corp (N:) tumbled 90 percent, missing analysts’ expectations, amid weakness in oil prices .

Chief Executive John Watson bluntly said the results were “weak” and that he was working to slash costs by renegotiating supply contracts. Earlier this week, he laid off 2 percent of the company’s staff.

“Multiple efforts to improve future earnings and cash flows are underway,” Watson said in a statement on Friday.

Chevron earned a net income of $571 million, or 30 cents a share, compared with $5.67 billion, or $2.98 per share, a year earlier.

Excluding one-time items, Chevron earned 97 cents a share. By that measure, analysts expected earnings of $1.16 per share, according to Thomson Reuters I/B/E/S.

Shares fell 2 percent to $91.25 in premarket trading Friday.

Chevron would have posted a loss had it not been for its downstream unit, which makes gasoline, lubricants and other refined products, where profit quadrupled to $2.96 billion.

Refining units tend to be far more profitable when oil prices are low, a key advantage for Chevron and other large energy companies as an internal hedge for times when core operations, such as oil production, is weighed down by weak prices.

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Chevron’s upstream unit, responsible for the company’s oil and output, lost $2.22 billion, after earning more than $5 billion in the same quarter last year.

In all, production rose 2 percent to 2.6 million barrels of oil equivalent per day (boe/d), largely due to Chevron’s Permian shale operations in Texas and output from Bangladesh.

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