Oil industry leader Chevron's (CVX Free Chevron Stock Report) shares got a lift after the company reported reasonably good second-quarter earnings results. Share profits of $0.78 included $270 million of net noncash charges which, if ignored, allowed the company to surpass recently reduced Wall Street estimates. The analyst community in the past few weeks has lowered its opinion of what oil companies are capable of earning, since quotations for crude oil have struggled with an overhang of inventory.

Also providing room for optimism was a strong, 10% rise in combined oil and natural gas production versus the prior year. That is a big number considering the size of a major, integrated petroleum company, such as Chevron. The company benefited from good performance at its large, Gorgon LNG project in Australia and had record production from its shale assets in the Permian Basin of west Texas. Looking ahead, first production from another LNG venture in Australia is expected in August.

One of the few hitches in the quarterly update was the disclosure of a modest loss from domestic drilling operations. It appeared as though Chevron had turned a corner here, since it generated a small profit stateside in the first three months of 2017. Even so, the loss was much narrower than a year earlier, and there are preliminary signs that the backdrop for oil quotations may improve. That is assuming the drawdown in crude oil stockpiles continues to accelerate.

Oil-price volatility in recent years has led Chevron to reduce operating expenses and capital spending. Those items were lower by 10% and 25%, respectively, for the first six months of 2017. Further efficiency gains, on a per-barrel basis, are probably within reach as the company pumps up volume. In particular, Chevron's enviable position in the Permian Basin should pay off nicely in the coming years as productivity is enhanced.

Downstream, results were solid, if unspectacular, as higher margins on refined product sales lifted performance, although asset sales reduced volume in U.S. operations. In terms of its long-term positioning, Chevron is more likely to be a seller than a buyer of refineries. The company's focus is more on building up its drilling operations, which the investment community favors.

On the whole, Chevron's second-quarter earnings report was upbeat. All told, conservative, income-oriented, investors looking for a long-term stake in the energy sector may like Chevron's prospects.

About The CompanyChevron has daily gross crude oil and natural gas liquid production of about 2.594 million barrels. Natural gas production averages around 5.252 billion cubic feet. The company operates a multitude of well sites all over the globe, as well as owning/leasing about 3,955 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.