U.S. energy giant Chevron Corp. CVX reported dismal second quarter earnings amid a plunge in oil prices. Earnings per share came in at 30 cents, well below the Zacks Consensus Estimate of $1.13 and the year-ago profit of $2.98. It reflected in its share price on the NYSE, where it fell around 4.5% in early trade.
The company’s quarterly revenue moved down 30.3% year over year to $40,357 million. However, it was enough to beat the Zacks Consensus Estimate of $29,533 million on improved downstream results.
Chevron joins integrated supermajors like BP plc BP and Exxon Mobil Corp. XOM in missing earnings expectations. Only Royal Dutch Shell plc RDS.A was able to cope better with the free fall in commodity prices and reported higher-than-expected profits yesterday.
Segment Performance
Upstream: Chevron’s total production of crude oil and natural gas edged up 2% from the year-earlier level to 2,596 thousand oil-equivalent barrels per day (MBOE/d). The U.S. output increased 9.5% year over year, partially offset by a 0.6% decline in the company’s international operations (accounting for 72% of the total).
Contribution from project ramp-ups (in the U.S., Argentina and Bangladesh), the effects of production entitlement in certain regions, and lower downtime associated with turnarounds were partially offset by normal field declines and output loss as a result of Chevron’s policy to shed some of its less-profitable projects.
However, gains on the production front could not make up for the sharp downfall in oil prices, the net effect resulting in a huge loss for the upstream segment – at $2,219 billion.
Nevertheless, Chevron’s production outlook remains one of the most robust in its peer group, with a number of major initiatives scheduled to come online during the next few years. Major start-ups during the last few quarters include the Jack/St. Malo and Tubular Bells deepwater developments in the Gulf of Mexico, Bibiyana Expansion Project in Bangladesh, liquefied natural gas (LNG) project in Angola, deepwater Usan project and the Escravos Gas-to-Liquids facility in Nigeria, Caesar/Tonga project in the deepwater Gulf of Mexico, and the Chirag development in the Caspian Sea.
Amongst the major upcoming projects, Chevron’s Gorgon and Wheatstone natural gas initiatives in Australia are progressing well.
Downstream: Chevron’s downstream segment achieved earnings of $2,956 million, considerably higher than the profit of $721 million last year. The results were buoyed by higher refinery margins on the back of lower feedstock costs.
Capital Expenditure & Balance Sheet
The second-largest U.S. oil company by market value after Exxon Mobil spent $8,724 million in capital expenditures during the quarter. Approximately 92% of the total outlays pertained to upstream projects.
As of Jun 30, 2015, the San Ramon, CA-based Zacks Rank #3 (Hold) company had $12,156 million in cash and total debt of $31,910 million, with a debt-to-total capitalization ratio of about 17.1%.
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