SAN FRANCISCO — ChevronTexaco Corp. wrote off most of its investment in fallen energy merchant Dynegy Inc. on Thursday, resulting in a third-quarter loss of $904 million.
The San Francisco-based company absorbed $1.55 billion in charges to account for its soured investment in Houston-based Dynegy, punctuating a disappointing quarter for the oil giant.
If not for the Dynegy setback and other one-time charges totaling $485 million, ChevronTexaco said it would have recorded a profit of $1.24 billion, or $1.17 per share.
That fell well below the consensus earnings estimate of $1.30 per share among analysts polled by Thomson First Call.
ChevronTexaco’s third-quarter loss of 85 cents per share contrasted with a profit of $1.27 billion, or $1.19 per share, last year. Third-quarter revenue totaled $25.35 billion, a 2 percent decrease from last year.
The company’s shares fell $3.77, or 5 percent, to close at $67.63 Thursday on the New York Stock Exchange.
“It’s hard to call this anything but a weak quarter,” said Banc of America Securities analyst Tyler Dann.
ChevronTexaco said oil production problems and lackluster demand for its refined products diminished its third-quarter performance.
In one of its bright spots, the company said the savings from Chevron’s $39 billion takeover of Texaco are piling up faster than anticipated. ChevronTexaco reduced the combined company’s overhead by $1.8 billion about six months ahead of schedule. The company expects to realize an additional $400 million in savings by April.
The cost-cutting so far has included the elimination of about 5,500 jobs — about 1,000 more than management projected shortly after the merger. ChevronTexaco attributed the increase to government requirements that forced the company to put about 1,000 international contractors on its payroll.
This marks the second consecutive quarter that ChevronTexaco has been tainted by its 26.5 percent stake in Houston-based Dynegy, which emerged as a rising corporate star when power prices soared in 2000 and the first half of 2001.
Dynegy is now struggling to survive amid dramatically lower power prices and the financial fallout from the accounting scam uncovered a year ago at Enron Corp., once the nation’s largest energy trader.
Dynegy’s downfall has saddled ChevronTexaco with more than $2 billion in losses so far this year, a jarring about-face from 18 months ago.
When Dynegy’s stock peaked at $57.95 during the spring of 2001, ChevronTexaco’s stake was worth about $5 billion. Dynegy’s success also boosted ChevronTexaco’s earnings by $188 million between January 2000 and June 2001.
Even after the Enron scandal broke a year ago, ChevronTexaco demonstrated its support of Dynegy by investing an additional $1.5 billion as part of a bid to buy Enron. That deal eventually was called off, but ChevronTexaco’s investments in Dynegy continue to haunt the company.
“This has been an expensive lesson and a real headache for ChevronTexaco,” said industry analyst Fadel Gheit of Fahnestock & Co.