Chevron, the second-largest U.S. oil company after Exxon, on Friday said it made a record profit Friday of $11.6 billion, up from $3.1 billion in the same period last year. Revenues nearly doubled to $68.7 billion, crushing Wall Street expectations by $11 billion. Chevron’s refining sector and profits from overseas oil production fueled the massive recovery for $CVX. Fellow American Oil giant Exxon Mobil also posted a record profit Friday of $17.9 billion, its highest ever and nearly four times the same period a year ago. On Thursday, Shell reported its second consecutive record quarterly profit of $16.7 billion.
Chevron is the US’s second biggest oil company after Exxon
Chevron Inc. (NYSE: $CVX) Reported Earnings Before Open Friday
$5.82 Missed $4.96 EPS AND $68.76 billion Beat $37.60 Billion Revenue Forecast
Earnings release: before market; conference call: 11 a.m.
Earnings
Chevron’s beat analysts’ earnings estimate on both the top and bottom lines. Chevron earned $5.82 per share excluding items on $68.76 billion in revenue. Analysts were expecting the company to earn $5.10 per share on $59.29 billion in revenue, according to estimates compiled by Refinitiv.
“We more than doubled investment compared to last year to grow both traditional and new energy business lines,” Chevron CEO Mike Wirth said in a statement.
Highlights
Chevron Corporation Q2 22 Earnings:
- Adj EPS: $5.82 (Estimate: $4.96)
- Total Revenue And Other Income $68.76B Vs $37.60B
- Chevron’s average sales price for crude oil and natural gas liquids jumped 65% to $89/bbl up from $54 during the same period last year.
- The average selling prices for natural gas surged to $6.22 per thousand cubic feet, up from $2.16 during the year-earlier period.
Production
Chevron’s output in the Permian Basin rose 15% year over year. Separately CEO Mike Wirth said the company more than doubled its investment versus last year to expand production in the Permian Basin, an oil-rich area that spans Texas and New Mexico.
“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 and exploratory spending in the first half of the year increased 26% to $6.7 billion, up from $5.3 billion in 2021.
CFO Pierre Breber on Chevron’s earnings conference call, said capital spending likely will come in below its $15B target for the year, before rising in 2023 to the annual $15B-$17B target management set earlier this year
“Our budget this year is around $15bn and our guidance through 2026 is $15bn to $17bn per year, So that gives us $2bn of room to increase . . . you should see higher capital from us in 2023,” he said, pointing to the Permian as an area likely to have increased output.
Buybacks
Chevron lifted the upper end of its share-repurchase program this year to as much as $15 billion, up from $10 billion, and paid off debt.
“In the short term (cash from oil) goes to the balance sheet. There’s no nowhere else for it to go,” Chevron CFO Pierre Breber told Reuters.
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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