Chevron, the second-largest U.S. oil company after Exxon, on Friday reported weaker-than-expected third quarter earnings. Adjusted earnings of $3.05 a share was below estimates for $3.70, however revenue of $51.9 billion beat expectations for $51.4 billion. Profits were impacted by lower upstream realizations and lower margins on refined product sales. Refineries delivering the weakest segment result in the past six quarters. Lower natural gas prices impaired both Chevron but also peer ExxonMobil who also reported. CVX’s natural gas sales are higher since its acquisition of Colorado producer PDC Energy.
Chevron stock sold off on the report, CVX closed down at $144.35 ▼ -10.40 (-6.72%) on the day and trade at a 52-week low $143.96. Chevron, like Exxon has been busy with takeovers. On Monday they announced a $53 billion deal to buy Hess (HES) that will give it a stake in the hot Guyana offshore oil-drilling project.
Chevron Inc. (NYSE: $CVX) Reported Earnings Before Open Friday
Chevron Corporation Q3 23 Earnings:
Highlights
- Adjusted third-quarter EPS $3.05 missed Zacks Consensus Estimate of $3.68. Declined from year-ago quarter’s $5.56. Declined 18.9% year over year.
- Revenues of $54.1 billion beat the Zacks Consensus Estimate of $54 billion.
- Chevron’s downstream earnings missed the Zacks Consensus Estimate by 12.3%.
- Chevron’s third-quarter 2023 Upstream segment profit decreased 38.2% to $5.7 billion. This was mainly on account of a sharp drop in oil and natural gas prices.
- Chevron plans to increase next year’s dividend by 8% and boost annual share buybacks by 14% to $20 billion.
“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
- $144.35 ▼ -10.40 (-6.72%) on the day.
- $144.35 ▼ -35.63 (-19.8%) past year
- $144.35 ▲ +29.62 (+25.82%) past 5 years
- 52wk High $189.68
- 52wk Low $143.96 (today)
Upstream:
- Crude oil and natural gas production of 3,146 MBOE/d, up 3.9% year over year. The latest volume statistics primarily reflect an impressive output from the Permian basin.
- Worldwide net oil-equivalent production increased due to the acquisition of PDC Energy, Inc.
- U.S. output increased 19.6% year over year to a record 1,407 MBOE/d
- International operations (accounting for 55% of the total production) came down 6.1% to 1,739 MBOE/d.
- Chevron’s third-quarter 2023 Upstream segment profit decreased 38.2% to $5.7 billion. This was mainly on account of a sharp drop in oil and natural gas prices.
- At $62 per barrel, Chevron’s average realized liquids prices in the United States were $14 below the year-earlier levels and the same declined 14.6% to $76 per barrel in the international markets.
- Natural gas was down 80.3% and 32.8% in the United States and international markets, respectively.
Downstream:
- Profit of $1.7 billion, down from the prior-year quarter’s figure of $2.5 billion.
- This deterioration underlined lower margins on refined product sales and lower foreign currency effects.
Cash Flows, Capital Expenditure
- The company recorded $9.7 billion in cash flow from operations compared with $15.3 billion a year ago. Chevron’s free cash flow for the quarter totaled $5 billion.
- Chevron paid $2.9 billion in dividends and bought back shares worth $3.4 billion.
- Due to restrictions related to the acquisition of PDC Energy, share repurchases were lower than in the previous quarter.
- CVX spent around $4.7 billion in capital and exploratory expenditures during the quarter compared with $3 billion in the year-ago period.
Balance Sheet
- As of Sep 30, the company had $5.8 billion in cash and cash equivalents.
- It had a total debt of $20.6 billion
- Debt-to-total capitalization of about 11.1%.
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.
Chevron Aggressive Acquisition Hunt.
“By one oil-industry metric, known as cost-per-flowing-barrel, Chevron is paying a much higher price for Hess, but doing so will secure the California-based driller a 30% stake in Guyana’s Stabroek Block, one of the world’s largest crude discoveries in years.” – Bloomberg
Chevron To Buy Hess for $53 billion
Chevron entered into a definitive agreement to buy Hess Corporation (HESS) for $53 billion in an all-stock deal. Chevron will pay $171 per share for Hess, a premium of about 10% to the 20-day average price. Hess shareholders will receive 1.025 shares of Chevron for each Hess share, giving the company a total enterprise value of $60 billion, including debt. The acquisition gives Chevron a significant foothold in Guyana, where it’s competitor Exxon is a major producer and CVX says will enable faster production growth.
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.
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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