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Dow-30 Earnings: Chevron Corp. - Third Quarter 2013
Chevron Corp. (CVX - Free Chevron Stock Report) the world's fourth-largest oil company based on proven reserves, has reported lackluster third-quarter results. To wit, share net came in at $2.57, versus the year-earlier figure of $2.69, and our estimate of $3.60. Revenues were up slightly at $58.5 billion, compared to $58.0 billion a year ago. Worldwide net oil equivalent production was 2.59 million barrels per day, compared to 2.52 mmboe/d last year.
In the core Upstream (Exploration & Production) business, which constituted 96% of total sales, net profits were down slightly at $5.092 billion, compared with $5.139 billion in last year's September quarter. Although selling prices for oil and natural gas were up from last year, and production also rose, profits were hurt by increases in depreciation, exploration, and operating expenses at the U.S. segment.
In the Downstream operation (Refining & Marketing), which tallies 4% of total revenue, net profits were down significantly, to $380 million, versus $689 million a year earlier. The decline was due to lower refining margins, both at home and abroad. This was due to softer demand for refined products, such as gasoline, jet fuel, home heating oil, and propane gas. Greater supply due to overcapacity from China, the Middle East, and India also crimped margins.
Chevron's results were the last in the latest round of reports form large western oil and gas conglomerates, which have encountered rising production costs and slumping refining profits. Chevron has been continuing with its heavy capital expenditure program, trying hard to find new reserves. Year to date, it has spent a total of $28.9 billion on capital expenditures.
In addition, these top-tier giants have been sluggish in taking advantage of the rise in shale gas production from fields both foreign and domestic. Smaller, more nimble players, such as Pioneer Natural Resources, Apache, and Continental Resources, have had far greater success rate on this front.
It is important to note that Chevron's stock price has been range bound for some time now due we think to the well-publicized and long-standing litigation suit with the Ecuadorian government, which is suing it for $19 billion for past environmental infractions committed by its subsidiary, Texaco. Chevron, however, recently got a boost from testimony by a prominent NY commercial litigator who stated that he saw shocking levels of corruption on the part of the plaintiff.
At this juncture, we are looking for 2013 share earnings of $11.35, going up to $12.70 in 2014.
About The Company:Chevron has daily gross crude oil and natural gas liquid production of about 1.734 million barrels. Natural gas production averages around 4.782 billion cubic feet. Net proved reserves at 12/12 were 7.089 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.