Chevron (CVX) Q4 Earnings Beat Thanks To Permian Strength

Chevron Corporation (NYSE:CVX) reported adjusted fourth-quarter earnings per share of $1.49, above the Zacks Consensus Estimate of $1.47. The beat was driven by strong production from the Permian Basin.

However, the bottom line was below the year-earlier quarter's earnings of $2.06 per share due to lower oil and natural gas price realizations.

The company, which recently raised its quarterly dividend from $1.19 to $1.29, generated revenue of $36.4 billion. The sales figure missed the Zacks Consensus Estimate of $39.8 billion and was down 14.2% year over year.

Chevron announced that it added 494 million barrels of oil-equivalent in proved reserves in 2019, primarily from LNG projects in Australia and deepwater assets in the Gulf of Mexico.

Segment Performance

Upstream: Chevron’s production of crude oil and natural gas remained essentially unchanged from the year-earlier level at 3,078 thousand oil-equivalent barrels per day/MBOE/d (61.5% liquids) – the fifth successive quarter where volumes exceeded 3 million barrels per day.

Contribution from the shale assets in the prolific Permian Basin were offset by normal field declines, turnarounds and the impact of asset dispositions. The fourth-quarter average production from the showpiece Permian Basin was 514 MBOE/d, up 36% year over year.

The U.S. output rose 16.3% year over year to 998 MBOE/d but the company’s international operations (accounting for 68% of the total) fell 6.5% to 2,080 MBOE/d. For the full-year 2019, Chevron’s worldwide production averaged a record 3,058 MBOE/d, reflecting an increase of 4.4% from 2,930 MBOE/d a year ago.

Despite flat production volumes, Chevron’s upstream segment incurred a massive loss of $6.7 billion, compared with the year-ago profit of $3.3 billion. Apart from asset impairment charges, the nosedive to a loss could be blamed on significantly lower oil and gas realizations.

Downstream: Chevron’s downstream segment achieved earnings of $672 million, 21.8% lower than the profit of $859 million last year. The decline primarily underlined a fall in international refined products sales margins and planned turnaround activities.

Cash Flows, Capital Expenditure

America's No. 2 energy producer behind ExxonMobil (NYSE:XOM) delivered a soft cash flow performance this quarter – an important gauge for the oil and gas industry – with $5.6 billion in cash flow from operations, down from $9.1 billion a year ago. The decrease in cash flow could be attributed to falling lower price realizations in the upstream business.

The company's cash flow for the full-year 2019 was $27.3 billion, down 10.8% from 2018.

In the fourth quarter, Chevron paid $2.3 billion in dividends and repurchased $1.1 billion worth of shares. For the full-year 2019, the company shelled out $9 billion in dividends, and bought back $4 billion of its shares.

The Zacks Rank #2 (Buy) company spent just over $6 billion in capital expenditures during the quarter, edging up from the year-ago period’s $5.8 billion. More than 83% of the total outlays pertained to upstream projects. In 2019, capital spending amounted to $21 billion.

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

Balance Sheet

As of Dec 31, the San Ramon, CA-based company had $5.7 billion in cash and cash equivalents and total debt of $27 billion, with a debt-to-total capitalization ratio of about 15.8%.

Earnings Roundup of Other Oil Supermajors

Among the major integrated players, ExxonMobil and Royal Dutch Shell (LON:RDSa) RDS.A missed profit expectations, while BP plc (NYSE:BP) will report on Tuesday.

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