U.S. energy behemoth Chevron Corp. (CVX) released its first quarter 2012 interim update, covering the first 2 months of the quarter. On the whole, the update is bullish, with earnings expected to be higher than the previous quarter.
The company expects results for the Exploration and Production arm to improve sequentially, thanks to a rise in crude oil prices and lower operating expenses, partially offset by lower liftings.
The San Ramon, California-based integrated supermajor added that first quarter refining and marketing results would also fare better than the fourth quarter of 2011, benefiting from wider profit margins, a lid on costs and gains from the sale of its Spanish fuel marketing assets.
Additionally, Chevron expects net after-tax charges associated with corporate and other activities to come in between $300–$400 million.
Segmental Analysis
Upstream: The company reported that oil and natural gas production averaged 2.625 million oil-equivalent barrels per day, 4.9% below the first quarter 2011 level, due to reduced volumes both in the U.S. and overseas. Production would also be down by about a percent from that achieved during the fourth quarter of 2011.
In the first two months of the March quarter, Chevron’s total domestic oil equivalent production fell 17,000 barrels per day from the previous quarter levels, primarily due to the previously announced sale of Alaska oil and gas assets in Cook Inlet at year-end 2011. On the other hand, net international oil equivalent production – at 1,981,000 oil-equivalent barrels per day – was essentially unchanged from the fourth quarter of 2011.
U.S.crude price realizations during January-February 2012 averaged $105.65 per barrel, up marginally from $105.37 in the last quarter 2011, while international realizations were higher by $6.31 to $107.64 per barrel. Chevron’s domestic realized natural gas prices for this period averaged $2.70 per thousand cubic feet (Mcf), compared with $3.62 in the fourth quarter. Average international natural gas realizations were up 27 cents per Mcf to $5.82.
Downstream: Regarding downstream operations, the second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM) said that its U.S. refinery crude-input climbed 152,000 barrels per day, largely buoyed by the completion of a major maintenance activity at the Richmond, California refinery. Refinery crude-input volumes outside the U.S. were up a tad (by 7,000 barrels per day) during the same period.
First quarter refining margins increased $5.19 per barrel sequentially on the U.S. West Coast and by a healthy $8.72 per barrel on the Gulf Coast.
First Quarter Estimate
Chevron plans to release its quarterly results on Friday, April 27, 2012, before the start of trading. The Zacks Consensus Estimate for Chevron’s first quarter is $3.23 per share, higher than the earnings of $3.17 in the year-ago period and $2.61 earned in the previous quarter (both excluding adjustments for foreign-currency effects).
Chevron is currently a Zacks #3 Rank (Hold) stock, implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. We are also maintaining our long-term Neutral recommendation on the stock.
CHEVRON CORP (CVX): Free Stock Analysis Report
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