Chevron (CVX) Q1 Earnings Beat, Downstream Woes Continue

Chevron Corporation (NYSE:CVX) reported better-than-expected first-quarter earnings, boosted by production gains. The U.S. energy major, which is involved in a tussle with Occidental Petroleum Corp. (NYSE:OXY) to acquire Texas-based upstream company Anadarko Petroleum Corp. (NYSE:APC) , reported earnings per share of $1.39, ahead of the Zacks Consensus Estimate of $1.26.

However, the company’s bottom line fell from the year-ago profit of $1.90 on lower crude price realizations and drop in profits in its downstream business, which refines crude oil into fuels like gasoline and diesel oil.

Quarterly revenue of $35.2 billion missed the Zacks Consensus Estimate of $37.9 billion and was down 6.8% year over year.

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas increased 6.5% compared with last year’s corresponding period to 3,038 thousand oil-equivalent barrels per day (MBOE/d) – the second successive quarter where volumes exceeded 3 million barrels per day. The U.S. output rose 21% year over year to 884 MBOE/d while the company’s international operations (accounting for 71% of the total) increased 1.7% to 2,154 MBOE/d.

Apart from the shale assets in the prolific Permian Basin, the strong output could be attributed to contribution from its Wheatstone LNG development in Australia.

However, the rise in production was offset by lower oil realizations, the result being a 6.8% fall in Chevron’s upstream segment profit – from $3.4 billion in the year-earlier quarter to $3.1 billion.

Downstream: Chevron’s downstream segment achieved earnings of $252 million, 65.4% lower than the profit of $728 million last year. The decline primarily underlined a fall in refined products sales margins.

Cash Flows, Capital Expenditure

Importantly, America's No. 2 energy producer behind ExxonMobil (NYSE:XOM) delivered a solid cash flow performance this quarter – an important gauge for the oil and gas industry – with $5.1 billion in cash flow from operations, up marginally from $5 billion a year ago.

The Zacks Rank #3 (Hold) company spent $4.7 billion in capital expenditures during the quarter, up from the year-ago period’s $4.4 billion. Roughly 89% of the total outlays pertained to upstream projects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Balance Sheet

As of Mar 31, 2019, the San Ramon, CA-based company had $8.7 billion in cash and cash equivalents and total debt of $33.1 billion, with a debt-to-total capitalization ratio of about 17.6%.

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