Chevron Corp.'s (NYSE:CVX) profit tumbled in the second quarter as the oil company took over $2 billion in impairments and charges to suspend projects amid lower crude-oil prices. Shares of Chevron, down 17% this year, fell 1.8% to $91.35 a share in premarket trading. "Second-quarter financial results were weak, reflecting a crude-price decline of nearly 50% from a year ago, said Chief Executive John Watson in a news release. "Our upstream businesses were particularly hard hit, as lower prices reduced revenues and triggered impairments and other charges." Chevron booked $1.96 billion in impairments and $670 million in charges related to project suspensions and adverse tax effects. Chevron said the charges stemmed from a downward revision of its long-term crude-oil price outlook.
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Those charges were partially offset by $1.8 billion in asset sales in the quarter. Mr. Watson said the company has multiple efforts under way to improve its cash flow, which has been a problem lately as Chevron has spent cash faster than it comes in. "We're getting our cost structure down, through renegotiations across the supply chain and by sizing our contractor and employee workforce to reflect lower activity levels going forward," he said. In the latest quarter, Chevron's capital spending fell to $8.72 billion from $10.19 billion a year ago. In all, Chevron reported earnings of $571 million, or 30 cents a share, down from $5.67 billion, or $2.98 a share, a year earlier. Currency fluctuations decreased earnings by $251 million, compared with $232 million a year ago. Revenue fell 30% to $40.36 billion. Analysts polled by Thomson Reuters had forecast earnings of $1.16 a share and revenue of $30.9 billion. Chevron's exploration and production—known as the upstream segment—swung to a loss of $2.22 billion from a profit of $5.26 billion a year earlier. Refining, marketing and chemical operations—or downstream—earnings jumped to $2.96 billion from $721 million a year earlier. Chevron, the second-biggest U.S. oil company in market value behind Exxon Mobil Corp., has profits that are better insulated than most oil producers because it also makes money from refining the fuel into gasoline and diesel. The lower-cost crude has helped its refinery businesses improve profit margins. Production in the latest quarter grew 2% to 2.6 million barrels per day, owing to project ramp-ups in the U.S., Bangladesh and Argentina. Chevron's downbeat results came after Exxon Mobil on Friday reported a 52% drop in profit for its second quarter, as higher profit from its refining and chemical operations couldn't offset plunging earnings in its exploration and production business amid lower crude prices. Shares of Exxon were down 2.3% to $81.08 a share in premarket trading.