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Dow-30 Earnings: Chevron Corp. - Third Quarter 2012
Chevron Corp. (CVX – Free Chevron Stock Report), the world's fourth-largest oil company based on proven reserves, reported third-quarter results today. Share earnings were down 31%, to $2.69 on a year-over-year basis, while revenues dropped 9.9%, to $58 billion. The company's worldwide net oil equivalent production declined to 2.52 million barrels per day, from 2.60 million barrels per day in the year-earlier quarter.
A steady decline in output from Chevron's oil and natural gas wells, in conjunction with lower prices were the main reasons for the decline in operating results.
In the Upstream (Exploration & Production) business, production was down as many countries tightened control over their oil and gas assets, making it more difficult for multinationals like Chevron to develop reserves. In addition, planned maintenance-related downtime at plants in Kazakhstan, and the U.K., normal field declines, a shutdown of the Frade field in Brazil, and storm-related shutdowns in the Gulf of Mexico crimped sales. Foreign currency headwinds also adversely affected results.
In the Downstream (Refining & Marketing) operation, results were hurt by lower margins on refined product sales and higher operating expenses. Furthermore, a huge fire on August 6th at the company's oldest refinery in Richmond, California disrupted operations, decreasing sales and earnings. The plant is expected to remain offline at least through the fourth quarter. An unfavorable change in the effects on derivative instruments didn't help matters, nor did the lack of proceeds from asset sales (which benefited 2011's third-period results).
Looking ahead, production should be up 2%, to around 2.57 million barrels per day in the fourth quarter, reflecting the completion of planned turnarounds, and restoration of shut-in production in the Gulf of Mexico. However, we don't look for average oil and gas prices to rise much, if at all, meaning share net will probably come in at around $2.63. This would bring full-year share earnings to an estimated $12.25.
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.