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Dow 30 Earnings: Chevron Corp. - Fourth Quarter 2011
Oil giant and Dow-30 component Chevron Corp. (CVX - Free Chevron Stock Report) has reported fourth-quarter share earnings of $2.58, down from the year-earlier figure of $2.64. Sales were up 11.8% in the term, to $58 billion, thanks exclusively to higher oil prices, which averaged $101 per barrel, compared with $76 per barrel in the fourth quarter of 2010. The average sales price of natural gas fell to $3.62 per thousand cubic feet (mmcf), versus $3.65 per mmcf in the prior-year quarter. In addition, total worldwide net oil equivalent production was 2.64 million barrels per day (mmboe/d), compared with 2.79 mmboe/d in 2010's final period. Despite the solid earnings report, Chevron stock traded down modestly, as investors seemed wary of end-market demand.
Margins were squeezed due to a higher tax rate and the increased cost of purchased crude oil and products required for refining activities. These expenses rose to $36.3 billion in the latest term, from the year-earlier $30.1 billion.
The Upstream (Exploration & Production) business continued to be the star of the show, generating all of Chevron's operating profits in the fourth quarter ($5.74 billion). That total was 2.2% higher than last year, despite net oil equivalent production declining 5%, to 661,000 barrels per day. The Downstream operation (Refining & Marketing) posted an operating loss of $61 million in the December period, compared with a profit of $742 million in the previous year.
For 2011, Chevron generated a whopping 42% increase in share earnings, to $13.44, thanks entirely to rising oil prices. Full-year sales were up 23.2%, to $244 billion. Production declined from 2.76 mmboe/d in 2010 to 2.67 mmboe/d in the year that just ended. That shortfall was the result of normal field declines, maintenance-related downtime, and a 25,000-barrel-a-day negative effect from higher prices on entitlement volumes. Those factors more than offset rising production in Thailand, the United States, Nigeria, and Brazil.
The company continued to add to its natural gas reserves with additions to its Wheatstone project in Australia, two discoveries in the Cararvon basin in Queensland, and the ramp-up of production in its Platong II holdings in the Gulf of Thailand. On the domestic front, Chevron built more legacy positions with acquisitions in the Marcellus shale, and multiple deepwater projects in the Gulf of Mexico.
Looking ahead, we see earnings inching even higher in 2012, to around $14.00 a share, as oil prices remain steady. In fact, crude will likely average at about $100 a barrel this year, while natural gas edges up a bit to compete with the high oil prices. Production will probably stay muted in order to keep prices high, since the demand environment still remains somewhat sluggish.
About The Company:Chevron has daily gross crude oil and natural gas liquid production of about 1,850 million barrels. Natural gas production averages around 5,100 billion cubic feet. Net proved reserves at 12/10 were 7.173 billion barrels of oil. The company operates a multitude of well sites all over the globe, as well as owning/leasing about 4,100 gas stations, mostly in the United States.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.