Chevron (CVX) Q4 Earnings Jump, Helped By Rising Oil Price

U.S. energy giant Chevron Corp. (NYSE:CVX) reported weaker-than-expected fourth-quarter earnings after excluding the impacts of U.S. tax reform. The company reported adjusted earnings per share of 73 cents, lower than the Zacks Consensus Estimate of $1.27.

However, the bottom line improved significantly from the year-ago profit of 22 cents amid the recovery in oil prices and production gains. The profit growth further confirms the industry's resurgence from the deep oil slump. As a proof of the rebound, Chevron recently hiked its quarterly dividend payments to shareholders by 4 cents to $1.12 per share.

Quarterly revenue of $37,616 million surpassed the Zacks Consensus Estimate of $37,549 million and were up 19.4% year over year.

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas increased 2.7% compared with last year’s corresponding period to 2,740 thousand oil-equivalent barrels per day (MBOE/d). The U.S. output fell 1.6% year over year to 671 MBOE/d but the company’s international operations (accounting for 76% of the total) was up 4.1% to 2,069 MBOE/d.

Apart from the core business in Gulf of Mexico and higher volumes from shale assets in the prolific Permian Basin, the rise in output could be attributed to contributions from major capital projects – Gorgon and Wheatstone in Australia as well as Angola LNG.

The rise in production was supported by higher oil realizations, the result being a healthy improvement in Chevron’s upstream segment profit – from $930 million in the year-earlier quarter to $5,291 million.

Downstream: Chevron’s downstream segment achieved earnings of $1,279 million, a massive 258.3% higher than the profit of $357 million last year. The jump primarily underlined benefit from U.S. tax reforms and increase in domestic refined product sales.

Cash Flows

Importantly, Chevron delivered a good cash flow performance this quarter – an important gauge for the oil and gas industry – with $6,230 million in cash flow from operations, up from $3,863 million a year ago.

Capital Expenditures

The company spent $5,435 million in capital expenditures during the quarter, an increase from the $5,261 million incurred a year ago. Roughly 82% of the total outlays pertained to upstream projects.

Balance Sheet

As of Dec 31, 2017, the San Ramon, CA-based company had $4,813 million in cash and total debt of $38,763 million, with a debt-to-total capitalization ratio of about 20.7%.

Zacks Rank & Stock Picks

Chevron – which recently announced two new discoveries in the deepwater Gulf of Mexico with Royal Dutch Shell (LON:RDSa) RDS.A and TOTAL S.A (NYSE:TOT) , respectively – holds a Zacks Rank #3 (Hold).

Meanwhile, one can look at a better-ranked integrated energy player like Statoil (OL:STL) ASA (NYSE:STO) . Statoil sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Statoil is a major international integrated energy company with operations in all major hydrocarbon-producing regions of the world and an upstream focus on the Norwegian Continental Shelf. The Stavanger, Norway-headquartered company’s expected EPS growth rate for three to five years currently stands at 21%, comparing favorably with the industry's growth rate of 9.6%.

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