Chevron Earnings Soar on Record Permian Basin Production and Australian LNG Cargoes

Chevron, the second-largest U.S. oil company after Exxon, on Friday reported much better than expected earnings for the third quarter. CVX) reported adjusted earnings of $10.8 billion, or $5.56 a share, a 90% increase on the year-ago period but below the second-quarter’s record $11.4 billion. Chevron’s LNG cargoes were a record out of Australia and refining sector and profits from overseas oil production fueled the massive numbers for Chevron. Fellow American Oil giant Exxon Mobil also posted a record profit Friday of $19.66 billion, its highest ever. On Thursday, of $16.7 billion. On Thursday, Shell, Europe’s largest oil company reported stronger than expected third quarter results of $9.45 billion.

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 Q3 22 Earnings:

Chevron’s beat analysts’ earnings estimate on both the top and bottom lines with $11.2 billion for the third quarter of 2022, an increase of more than $5 billion over the same period last year. The company’s upstream segment reported earnings of $9.3 billion, an increase of nearly $4.2 billion year-on-year of more than $5.1 billion. US upstream operations earned $3.4 billion in the during the quarter, compared to approximately $1.96 billion during the same quarter a year ago.

“We delivered another quarter of strong financial performance with return on capital employed of 25%,” Chevron CEO Mike Wirth said in a statement.

Highlights

  • Adj EPS $5.56 (est $4.94)
  • Revenue $66.64B (est $60.80B)
  • Upstream Earnings $9.31B, (est. $8.13B)
  • Downstream Earnings $2.53B, (est. $1.95B)
  • Worldwide Production 3,027 MBOE/D, -0.2% Y/Y
  • Liquids Production 1,707 MB/D, -2.8% Y/Y
  • Cash flow from operations surged to a record $15.3B, free cash flow totaled $12.3B
  • Return on capital employed jumped to 25%.
  • CVX Q3 average sales price for crude oil and natural gas liquids in U.S. upstream operations was $76/bbl, up from $58/bbl in the year-earlier quarter
  • CVX average sales price of natural gas $7.05/Mcf from $3.25/Mcf in a year ago.

CVX Stock Market Reaction

  • Record & 52wk High today $182.86
  • 179.53 +1.63 (0.92%) Pre-Market
  • 179.53 +66.41(58.71%) YTD
  • 179.53 +45.88 (71.34%) Over year
  • 179.53 +61.09 (51.58%) Over 5 years

Production

  • Q3 worldwide net production totaled 3.03M bbl/day, with output in the international segment declining 3% Y/Y primarily due to the end of concessions in Thailand and Indonesia,
  • U.S. production increased 4%, mainly in the Gulf of Mexico and the Permian Basin.
  • Net production of 1.18 million boepd in third quarter of 2022 was up 49,000 boepd on the same period last year, primarily due to increases in the Gulf of Mexico and Permian basin, the company said,
  • Net liquids volume was 891,000 barrels per day, and net natural gas production was 1.71 billion cubic feet per day, similar to last year’s third quarter.
  • Output from the Permian Basin topped 700K boe/day, up 12% Y/Y and slightly more than 692K boe/day in Q2.

“With Permian production more than 15 percent higher than a year ago…Chevron is increasing energy supplies to help meet the challenges facing global markets,” he said in a news release.

Capex

Capital expenditures in 2023 are expected to come in around $17 billion, the high end of previous guidance.

Buybacks & Dividends

Chevron also detailed its shareholder returns for the quarter, announcing dividends of $2.7 billion during the three-month span.

The company also increased investments by more than 50% year-on-year, reduced debt and repurchased $3.75 billion worth of company stock.

Politics, Survival and Big Oil

The turnaround is remarkable when you consider that a multitude of companies file for bankruptcy following the worldwide outbreak of Covid-19 in 2020. Exxon and Chevron posted historic losses that year, and Exxon got kicked off the Dow Jones Industrial Average as energy sunk to less than 2.5% of the S&P 500.

Oil and gas shares have outperformed the market this year, with the S&P 500 Energy index up about 35% since the start of 2022, compared with a 15% drop for the broader index. Since the start of 2022, Exxon and Chevron shares are up about 46% and 26%, respectively, while the energy sector has grown to more than 4% of the S&P 500.

US President Biden and Democrats in Congress are desperate ahead of midterm elections in November and desperate to change the narrative and redirect blame on energy policy. In June, Mr. Biden was asked if he would go after Exxon’s profits. “We’re going to make sure everybody knows Exxon’s profits,” he said. “Exxon made more money than God this year.”

He is also has authorized the biggest sale of SPR reserves in history which has still not kept oil prices much under $100 a barrel. This has fueled the US oil to record exports and therefore profits. What the Administration fails to grasp is refinery capacity is full and as such crude is exported, helping the US deficit and the oil majors. Is that a bad thing? Depends on your narrative.

Oil and gas prices have soared since the global economic lockdowns and widespread travel restrictions reversed.


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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