Chevron Earnings Miss on Weaker Production Outweighing Gains from Soaring Oil and Natural Gas Prices

Chevron reported worse than expected fourth quarter earnings Friday. $CVX missed bottom-line expectations which saw the stock drop over 4%. Weaker than expected oil and gas production were not able to take advantage of multi-year highs of energy prices. The miss was driven by International upstream primarily in Indonesia. Downstream earnings disappointed with weakness across both refining and chemicals. Fellow oil major Exxon report next week.

Chevron Gas Station

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

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

$2.65 Missed $3.12 EPS AND $48.1 Beat $45.33 Billion Revenue Forecast

Earnings release: before market; conference call: 11 a.m.

Chevron Corporation Q421 Earnings:

Chevron earnings have been highly anticipated as it was the first major oil company to report quarterly results in the midst of seven-year high oil. CVX adjusted earnings of $5.1 billion, or $2.65 a share, missing analysts forecast of $3.12 per share profit, Refinitiv showed. Chevron posted its fourth consecutive profitable quarter, compared with a loss of $665 million during the same period a year ago. Fourth quarter revenue jumped nearly 91 percent to $48.1 billion, up from $25.2 billion a year earlier and above the $45.337 billion FactSet consensus.

Chevron’s annual profit and revenue surpassed pre-pandemic levels. The company’s $15.6 billion profit in 2021 compares with a loss of $5.5 billion in 2020 and a profit of $2.9 billion in 2019. Annual revenue in 2021 soared to $162 billion, compared with $94.7 billion in 2020 and $146.5 billion in 2019.

  • Chevron oil and gas producing operating profit of $5.2 billion, up from $501 million in the same period a year ago, but below analyst expectations for about $6.6 billion operating profit.
  • Chevron refining earnings were $760 million, down from the $1.31 billion in the third quarter but up from a loss of $338 million a year ago.
  • Operating results were below analyst forecasts in its oil and gas and refining businesses, while upstream earnings were $4.15 billion, down from $5.14 billion in the third quarter.
  • Chevron sharply cut spending on new projects in 2020 as the pandemic took its toll, a move that helped profits soar as oil and gas prices rebounded. This however hurt production. The benchmark oil price last quarter averaged $79 per barrel compared with $43 a year earlier.
  • Chevron generated $21.1 billion in free cash flow in 2021, its most ever.

Chevron’s oil and gas production was 3.12 million barrels per day (bpd) of oil equivalent in the quarter, down 5% from a year earlier. A 181,000 bpd drop in international output was mostly because of the loss of an Indonesian production license.

Before the report Chevron shares hit an all-time high on expectations high oil prices would drive earnings, climbing to $137.00 on Thursday. Shares were off before market open at 130.64 ▼ 4.73 (3.49%).

“In 2021, we delivered record free cash flow and accelerated our progress towards a lower carbon future,” Chevron CEO Mike Wirth said. “We’re an even better company than we were just a few years ago. We’re more capital and cost efficient, enabling us to return more cash to shareholders.”

Buy backs & Dividend

  • The company said its first-quarter share buybacks would be at the higher end of the $3 billion to $5 billion annual range it had estimated last year.
  • Chevron raised its dividend by 6% to $1.42 per share this week.

Outlook

“I expect 2022 will be even better for cash returned to shareholders,” Chief Executive Michael Wirth said. “We’re more capital and cost efficient, enabling us to return more cash to shareholders.”

However further weakness in the report from a 3% contraction in year-on-year production guidance for 2022.

Chevron said it’s international oil and gas sold for $74 a barrel, up from $40 per barrel in the same quarter last year. Worldwide net oil and gas production for the full-year 2021 was 3.1 million barrels per day, a slight increase from a year ago.

Chevron said in December it would increase capital expenditures in 2022 to $15 billion, a 20% increase from the previous year but still well below pre-pandemic levels. Chevron Chief Financial Officer Pierre Breber said the company will maintain that budget. Chevron has said it would spend between $15 billion and $17 billion through 2025 compared with previous plans to spend $19 billion to $22 billion a year before the pandemic.


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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