Chevron Earnings Lower with Crude Prices and Refinery Margins

Chevron, the second-largest U.S. oil company after Exxon, on Friday reported better-than-expected second quarter earnings adjusted earnings were $5.8 billion, or $3.08 per share, down nearly than 50% from the same period last year but over the consensus forecast of $2.93 per share. Revenues fell 29.2% from last year to $48.90B, ahead of estimates of $48.52Billion. CVX said profits fell due to lower upstream realizations and lower margins on refined product sales. Chevron last Sunday pre-released warning investors that adjusted net income would fall with the lower crude prices.

Lower earnings have been across the big oil board. Exxon Mobil (CVX), Shell (SHEL) and TotalEnergies (TTEF) have reported profit falls of 56%, 56% and 49%, respectively.

Chevron Gas Station
Chevron is the US’s second biggest oil company after Exxon

Chevron Inc. (NYSE: $CVX) Reported Earnings Before Open Friday

Chevron Corporation Q2 23 Earnings:

Highlights

  • Adj EPS $3.08 (est $2.93)
  • Rev $48.90B (est $48.52B)
  • Chevron’s production of crude oil and natural gas at 2,959 MBOE/d (59% liquids) rose 2.2% year over year. Record Permian Basin production of 772kboepd.
  • Cash flow from operations of $6.3 billion compared to $13.8 billion a year ago, highlights drop in realized oil and gas prices.
  • Capex rose by 18% mostly
  • Bought Back More Than 27 Million Shares for $4.4 Billion in Q2

“Our quarterly financial results remain strong, and we returned record cash to shareholders,” said CEO Mike Wirth. The company has delivered more than 12% ROCE for eight straight quarters and returned $7.2 billion to shareholders in the quarter, an increase of 37% from the year-ago period.

“Strong execution resulted in record Permian Basin production this quarter,” he added. “Our consistent performance and disciplined use of capital are driving superior value for our shareholders.”

CVX Stock Market Reaction

  • $158.46 -1.2 (0.75%) Pre-Market
  • $158.46 +8.07(5.37%) past year
  • $158.46 +34.51 (27.84%) past 5 years
  • 52wk High $184.77
  • 52wk Low $136.82

Agreement to buy PDC Energy. 

Announced an agreement to acquire PDC Energy, Inc. in an all-stock transaction, with closing anticipated in August 2023. This acquisition is expected to add $1 billion to annual free cash flow.

Production

  • Chevron’s production of crude oil and natural gas at 2,959 MBOE/d (59% liquids) rose 2.2% year over year. The latest volume statistics primarily reflect impressive output from the Permian basin.
  • The U.S. output increased 4% year over year to a record 1,219 MBOE/d,
  • International operations (accounting for 59% of the total) edged up 0.9% to 1,740 MBOE/d.
  • Achieved first natural gas production from the Gorgon Stage 2 development in Australia, supporting long-term energy supply in the Asia-Pacific region.

Upstream

  • U.S. upstream earnings were lower than a year ago, primarily on lower realizations, partially offset by lower operating expenses due to the absence of a 2022 early contract termination and higher sales volumes.
  • U.S. net oil-equivalent production was up from second quarter 2022 and set a new quarterly record primarily due to growth in the Permian Basin.
  • International upstream earnings were lower than a year ago primarily due to lower realizations and lower foreign currency effects, partially offset by favorable tax items and higher sales volumes.
  • Net oil-equivalent production was up 16,000 barrels per day from a year earlier primarily due to lower impacts from turnarounds in Australia, partially offset by shutdowns in Canada due to wildfires.

Downstream

  • U.S. downstream earnings were lower compared to a year ago primarily due to lower margins on refined product sales and higher operating expenses.
  • Refinery crude oil inputs increased 9 percent compared to a year ago, primarily due to the absence of 2022 turnaround activity at the Richmond, California refinery.
  • Refinery product sales were up 7 percent from a year ago, primarily due to higher renewable fuel sales following the Renewable Energy Group, Inc. acquisition and higher demand for gasoline and jet fuel
  • International downstream earnings were lower compared to a year ago primarily due to lower margins on refined product sales and lower foreign currency effects.
  • Refinery crude oil inputs decreased 2 percent from the year-ago period as refinery runs decreased due to planned turnarounds.
  • Refined product sales increased 9 percent from the year-ago period, primarily due to higher demand for jet fuel as air travel increased in Asia.

Capex

Capex in the second quarter of 2023 was up 18 percent from a year ago primarily due to
higher investment in the United States

Buybacks & Dividends

Quarterly shareholder distributions were a record $7.2 billion during the quarter, including dividends of $2.8 billion and share repurchases of $4.4 billion (over 27 million shares repurchased during the quarter and nearly 50 million shares year-to-date).

Outlook

Chevron Chief Executive Officer Mike Wirth said that the company was spending more money to increase future energy supplies.

“We intend to leverage our capital discipline, advantaged assets and financial strength to deliver lower carbon energy to our customers and superior cash distributions to our shareholders,” Mr. Wirth said.


Noble Acquisition

The company’s $13bn acquisition of Noble, the first big move in a wave of mergers that swept through the battered US oil sector last year. closed in the fourth quarter of 2020. For 2018 through 2020, the company generated asset sales proceeds of $7.7 billion, in the middle of its guidance range of $5-$10 billion.

About Chevron

Chevron Corp. is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. It has large exposure to the Permian and to LNG with the  Wheatstone Chevron LNG Facility production starting in Western Australia

The Permian Basin remains a key source of capital flexibility, and it is a key issue behind many analysts preference for Chevron versus some of the other majors. Chevron’s liquids-rich upstream segment is likely to benefit from higher crude price realizations. This segment is expected to record higher production volumes on the back of major capital projects including Gorgon, and core developments in the Gulf of Mexico and Permian Basin.

Sources: TradersCommunity, CVX, AlphaStreet

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