UPDATE: Caltex Tips Big Profit Fall; Refining Unit Hurting

Caltex Australia Ltd. (CTX.AU) on Friday forecast an up to 40% drop in annual profit as regional competition, high oil prices, a higher Australian dollar and refinery shutdowns continue to plague its refining business.

Australia's biggest oil refiner, 50%-owned by Chevron Corp. (CVX), forecast a replacement cost of sale operating profit for cal ender 2011, which smoothes out the impact of oil price movements on its stockpiles, of A$180 million-A$200 million, down from A$302 million in 2010.

The forecast includes costs associated with the closure of a refining unit at its Kurnell facility in Sydney. Profit, excluding such significant items, is forecast to fall to A$245 million-A$265 million, from A$318 million.

Caltex, which also has a much stronger fuel marketing business, said that a review of its refining operations is ongoing.

"A broad range of options is being explored and the complex nature of this work means that a decision is still a number of months away," it said in a statement.

Australian refineries are competing with much larger Asian operations with greater scale and lower costs. Royal Dutch Shell PLC (RDSB.LN) recently decided to shut its Clyde refinery in Sydney and convert it into a fuel import terminal.

Caltex forecast a historic cost profit for 2011, which includes stockpile values, of A$330 million-A$350 million, compared with A$317 million last year. Caltex said its forecasts are based on the assumption that the Australian dollar will close the year at parity with the U.S. greenback.

-By Sydney bureau; 61-2-8272-4680; djnews.sydney@dowjones.com

Caltex Australia (ASX:CTX)
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