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Dow-30 Earnings: Chevron Corp. - Second Quarter 2012
Chevron (CVX - Free Chevron Stock Report), the world's fourth-largest oil company based on proven reserves, like many of its supermajor peers, saw its net income decline in the second quarter due to falling oil prices. Indeed, net income fell almost 7%, to $7.21 billion, or $3.66 per diluted share. (This bottom-line tally includes the effects of the repurchase of $1.25 billion worth of common stock.)
Revenue fell 9.2%, to $62.61 billion. The revenue shortfall snaps a streak of four consecutive quarters of revenue increases. Chevron's average sales price per barrel of crude oil and natural gas liquids was $98 in the second quarter, compared to $105 in the year-earlier interim. The company derives about 76% of its production from crude oil and natural gas liquids.
In addition, worldwide net oil equivalent production was down in the second quarter due to normal field declines, the shut-in of the Frade field in Brazil, maintenance-related down time, dispositions, and the lack of a need to produce oil and gas due to sluggish global demand. Net oil equivalent production declined 2.6%, to 2.62 million barrels per day.
In the Downstream (Refining & Marketing) business, sales and earnings were up, thanks primarily to improved margins on refined product sales. The international downstream operation's results benefited from sale of GS Caltex's operations in South Korea, and a favorable change in the effects of derivative instruments. All told, downstream earnings rose 80%, to $1.88 billion.
Significant milestones achieved in the Upstream (Exploration & Production) segment consisted of enhanced natural gas development projects in Asia/Pacific, including a natural gas discovery in the Carnarvon Basin in Australia. The company also bid successfully for potentially productive exploration blocks in Kurdistan, Suriname, Ukraine, and the Gulf of Mexico. In the Downstream business, Chevron continued to divest non-core assets, as well as furthering its new natural gas growth investments.
We have become increasingly negative regarding Chevron's results for the second half of the year due to lower oil prices and weaker production volumes. As such, we have reduced our third-quarter share-net estimate from $3.80, to $2.95, and our fourth-quarter call from $3.63, to $2.57. This has resulted in an estimated full-year 2012 tally of $12.45, down from our previous forecast of $14.40.
About The Company: Chevron has daily gross crude oil and natural gas liquid production of about 1,850 million barrels. Natural gas production averages around 5,100 billion cubic feet. Net proved reserves at 12/11 were 7.173 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.