Chevron Corp. (CVX – Free Chevron Stock Report), the world's fourth-largest oil company based on proven reserves, and a Dow-30 member, has reported first-quarter sales and diluted share net of $53.3 billion and $2.36, respectively. Sales came in 6.2% below the year-earlier figure of $56.8 billion, and share earnings were a substantial 35% lower. The stock dropped slightly on the news, although analysts were expecting weak results based on the first-quarter performances of Chevron's multi-national peers. We were looking for share net of $2.60 and sales of $57 billion.
Chevron's results suffered from lower production volumes and weaker selling prices of crude oil. Declining prices were a result of poor economic growth and thus, lower energy demand. Production downturns were due to adverse weather conditions, aging fields, and difficulties encountered with extracting oil and gas from greater depths and more remote geographic locations. The higher costs associated with mining oil and shale gas from these inaccessible locations contributed to slimmer margins.
Upstream (Exploration and Production) profits (96% of total income) were 27% lower, at $4.3 billion. Overseas earnings constituted the bulk of profits in this segment (79%). Net oil-equivalent production was 2.59 million barrels a day, down from 2.65 million barrels per day in the year-earlier quarter. Production increases from new project ramp-ups in Nigeria, Angola, and the U.S., were more than offset by normal field declines and weather-related, unplanned, downtime, particularly in Kazakhstan. The company's average sales price per barrel of oil and natural gas liquids in its International segment was $99, compared to $102 a year ago.
In the Downstream (Marketing and refining) business, profits were up $9 million, to $710 million. This was thanks to the U.S. Upstream operation, which posted profits of $422 million, compared to $135 million a year ago. The International Downstream division registered a profit of $288 million, compared to $566 million a year earlier.
Chevron is oil weighted, and the likelihood of no real rise in global demand for oil over the next few quarters means that earnings for the remainder of the year aren't expected to be stellar. Sales of oil to powerhouses like China aren't expected to be strong, as the remnimbi declines against the dollar and China's GDP growth wanes. In addition, Chevron is being increasingly forced to operate in deep oceans, and remote places like the Arctic, in order to keep up production. Many of its existing fields are aging and tapped out. The company has a few hopeful projects in the pipeline (so to speak). Significant progress has been made on the construction of its Gorgon and Wheatstone reservoirs in Australia. The Jack/St Malo and Big Foot fields in the Gulf of Mexico are coming along nicely, and first production in these regions is expected in late 2014/early 2015. The company is also using its strong cash-flow generating ability to fund the construction of a huge liquid natural gas processing plant in Angola, North Africa. This will be used to supply natural gas to Mediterranean markets and near eastern countries.
We look for Chevron to post share net of $10.65 in 2014, on sales of $227.3 billion. This is below 2013's tallies of $11.09 and $228.8 billion, respectively. Worldwide net oil equivalent production is anticipated to be 2.58 million barrels a day, down from 2.66 million barrels a day in 2013.
Chevron is keeping investors interested by raising the dividend (it declared a 7% increase in the quarterly payout per share to $1.07, payable in June), and bolstering the bottom line with share buybacks.
About The Company:Chevron has daily gross crude oil and natural gas liquid production of about 1.811 million barrels. Natural gas production averages around 4.813 billion cubic feet. Net proved reserves at 12/13 were 7.112 billion barrels of oil. The company operates a multitude of well sites all over the globe, as well as owning/leasing about 4,035 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.