U.S. energy giant Chevron Corp. (CVX) reported better-than-expected fourth quarter earnings on improved downstream results that saw refining margins climb on lower input costs. Earnings per share came in at $1.85, well above the Zacks Consensus Estimate of $1.67.
However, Chevron’s performance deteriorated from the year-ago profit of $2.57 per share amid a plunge in oil prices.
The company’s quarterly revenue moved down 17.9% year over year to $46,088 million. However, it was enough to beat the Zacks Consensus Estimate of $33,277 million.
Chevron becomes the second integrated supermajor after Royal Dutch Shell plc (RDS.A) to come out with fourth quarter numbers. BP plc (BP) and Exxon Mobil Corp. (XOM) are scheduled to report next week.
Apart from the operational performance, Chevron also offered a glimpse of its 2015 capital spending plans. The company has pegged its capital budget at $35 billion, down 13% from the $40 billion it invested in 2014.
Segment Performance
Upstream: Chevron’s total production of crude oil and natural gas remained essentially unchanged from the year-earlier level at 2,582 thousand oil-equivalent barrels per day (MBOE/d). Though the U.S. output augmented 3.5% year over year, the company’s international operations (accounting for 74% of the total) registered a 0.9% fall in volumes.
Contribution from project ramp-ups in the U.S., Nigeria, Brazil, Argentina and Bangladesh were offset by normal field declines and output loss as a result of Chevron’s policy to shed some of its less-profitable projects.
However, the status-quo on the production front could not make up for the sharp downfall in oil prices, the net effect resulting in a 44.9% year-over-year decline in upstream earnings to $2,673 million.
Importantly, 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 months 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, while the company continues to successfully explore unconventional resources in the Permian Basin, Argentina and Canada.
Downstream: Chevron’s downstream segment achieved earnings of $1,518 million, considerably higher than the profit of $390 million last year. The results were buoyed by higher refinery margins on the back of lower feedstock costs.
Capital Expenditure, Balance Sheet & Share Repurchases
The second-largest U.S. oil company by market value after Exxon Mobil spent $11,290 million in capital expenditures during the quarter. Approximately 91% of the total outlays pertained to upstream projects.
As of Dec 31, 2014, the San Ramon, CA-based company had $12,785 million in cash and total debt of $27,818 million, with a debt-to-total capitalization ratio of about 15.2%. As part of the stock repurchase program, Chevron bought back $1,250 million worth of shares in the fourth quarter.
Zacks Rank
Chevron currently carries a Zacks Rank #5 (Strong Sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next one to three months.
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