U.S. energy giant Chevron Corporation CVX reported better-than-expected first-quarter 2015 results on higher production and improved downstream results that saw refining margins climb on lower input costs. Significant fall in total expenses also lent support to the outperformance. However, these positive factors were partially offset by plunging oil prices.
Earnings per share came in at $1.37, well above the Zacks Consensus Estimate of 74 cents. However, Chevron’s performance deteriorated significantly from the year-ago profit of $2.36 per share.
The company’s quarterly revenue plummeted 35.1% year over year to $34,558 million. Despite this fall in revenue, the company was able to beat the Zacks Consensus Estimate of $22,302 million.
Chevron is the fourth integrated supermajor after Royal Dutch Shell plc RDS.A, BP plc BP and Exxon Mobil Corp. XOM to have reported first-quarter results.
Segment Performance
Upstream: Chevron’s total production of crude oil and natural gas improved 3.6% from the year-ago quarter level to 2,681 thousand oil-equivalent barrels per day (MBOE/d). U.S. output increased 9.2% year over year while the company’s international operations (accounting for almost 74% of the total) registered 2% improvement in volumes.
Contribution from project ramp-ups in the U.S., 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 free fall in oil prices, the net effect resulting in a 63.8% year-over-year decline in upstream earnings to $1,560 million.
Importantly, Chevron is planning to withstand the unfavorable oil pricing environment by reducing cost and streamlining its portfolio. Among its major upcoming projects, Chevron’s Gorgon and Wheatstone natural gas initiatives in Australia are progressing well. Major start-ups during the last few months include the Jack/St. Malo – where the company boosted oil production to more than 70,000 barrels per day.
Downstream: The segment generated earnings of $1,423 million, considerably higher than the profit of $710 million last year. The results were buoyed by higher refinery margins on the back of lower feedstock costs.
Capital Expenditure, Balance Sheet & Share Repurchases
Chevron’s total cost during the quarter came in at $31,653 million, down 30.2% from the year-ago quarter level.
The company recorded $8,583 million in capital expenditures during the quarter. Approximately 95% of the total outlay pertained to upstream projects.
As of Mar 31, 2015, this San Ramon, CA-based second-largest U.S. oil company by market value after ExxonMobil had $12,675 million in cash and total debt of $33,933 million, with a debt-to-total capitalization ratio of about 17.9%.
Zacks Rank
Chevron currently carries a Zacks Rank #3 (Hold), implying that is the stock will perform in line with the broader U.S. equity market over the next one to three months.
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