Chevron's second-quarter profit topped analyst expectations, but it wasn't enough to impress investors as the second-largest U.S. oil company jousts with...

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SAN RAMON, Calif. — Chevron’s second-quarter profit topped analyst expectations, but it wasn’t enough to impress investors as the second-largest U.S. oil company jousts with a Chinese rival in a battle to buy Unocal.

Unocal didn’t lessen its takeover appeal with its second-quarter results, which were released yesterday shortly after Chevron’s.

Chevron said it earned $3.68 billion, or $1.76 per share, for the three months ended June 30. That represented an 11 percent decline from net income of $4.13 billion, or $1.94 per share, at the same time last year.

It wasn’t an apples-to-apples comparison because last year’s quarter included an $800 million lift from asset sales and a tax benefit.

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Revenue for this year’s quarter totaled $48.3 billion, a 26 percent increase from $38.2 billion last year.

Chevron’s earnings topped the mean estimate of $1.69 per share among analysts surveyed by Thomson Financial.

Exceeding those expectations was especially important as Chevron girds for a pivotal round in its duel with China’s government-owned CNOOC for ownership of Unocal.

Unocal’s board is recommending that its shareholders accept Chevron’s bid even as CNOOC fights to overcome U.S. political opposition to win with a higher all-cash bid of $18.1 billion, or $67 per share.

Chevron’s cash-and-stock bid lost $200 million of its value yesterday, falling to $17.1 billion, or $63.45 per share. The decline stemmed from a 93 cent, or 1.6 percent, drop in Chevron’s shares to close at $58.01. Unocal’s shares dropped 35 cents to close at $64.85, indicating Wall Street is betting Unocal shareholders will accept Chevron’s lower bid.

A vote of Unocal shareholders is scheduled Aug. 10.

Like the rest of its industry, Unocal thrived in the second quarter. The company said it earned $475 million, or $1.73 per share, surpassing the mean analyst estimate of $1.63 per share, according to Thomson Financial.

Anything that causes Chevron’s stock to rise would help narrow the gap between the two offers because 60 percent of the Chevron bid consists of the company’s stock. Had Chevron’s earnings missed analyst expectations, the company’s stock — and the value of its Unocal bid — probably would have plunged even further.

The stellar second-quarter results previously released by other major oil companies had raised hopes that Chevron would surpass analyst expectations by a much wider margin than it did, said Fadel Gheit of Oppenheimer. “Beating the consensus wasn’t much of an accomplishment,” he said.

Futures prices show that the gap between crude-oil costs and wholesale U.S. prices for gasoline and other refined fuels widened to $11.17 per barrel processed, a record for any quarter.

“The margins are unbelievable,” said Clayton Mahaffey, an analyst at Venture Research in Stamford, Conn.

ConocoPhillips has had the biggest profit growth this year among the three largest U.S. oil companies, followed by Exxon Mobil. Chevron has lagged behind.

Wall Street’s tepid response to Chevron’s quarter may embolden CNOOC as it tries to persuade Unocal to side with its offer despite a political backlash that threatens to delay the deal for months, if not derail it completely.

CNOOC, part of the China National Offshore Oil Corp., already has been authorized to raise its bid to $69 per share, according to documents filed with the Securities and Exchange Commission earlier this week.

But CNOOC has to balance its ability to raise its bid against its desire to avoid providing more political ammunition to its critics in Washington, D.C.

CNOOC has “to walk a tightrope,” Gheit said. “They desperately want Unocal, but they don’t want to do anything to scare the people in Congress.”

Many analysts think believe CNOOC will raise its bid next week just as Congress is preparing for summer recess.

But a Hong Kong newspaper, quoting an unnamed source involved in the negotiations, has reported CNOOC is leaning toward abandoning its bid.

Crude and wholesale oil margins information and comment provided by Bloomberg News.