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Dow 30 Earnings: Chevron - Third Quarter 2011
Chevron (CVX – Free Chevron Stock Report), a Dow-30 component and the fourth-largest oil company in the world based on proven reserves, has reported third-quarter earnings of $3.92 a share, compared to our estimate of $3.00 and the year-earlier tally of $1.87. The markedly better-than-expected figure was principally due to higher prices for crude oil and improved refining margins. Gains on asset sales also helped.
In the core Upstream (Exploration & Production) segment, profits rose a prodigious 74% year over year, to $6.2 billion. Income at the Downstream (Refining & Marketing) business also rose substantially, to $2.00 billion, up a whopping 252%. Net oil-equivalent production per day was down 5.1%, to 2.60 million barrels, due to maintenance-related downtime and normal field declines. However, higher prices for oil and natural gas more than made up for the shortfall. The company's average sales price per barrel of crude oil and natural gas liquids was $99 in the third quarter, compared to $70 a year before. And the average sales price of natural gas was $4.82 per thousand cubic feet, compared to $4.39 last year. Meanwhile, the International Downstream operation benefited significantly from a $500-million gain on the sale of the Pembroke refinery.
Major milestones achieved in the third quarter were the decision to maximize development of the huge Wheatstone and Gorgon liquid natural gas resources in Australia. This is designed to supply energy to growing demand in the Asia-Pacific region. Chevron also discovered a new oil prospect in its deepwater Gulf of Mexico Moccasin field. Lastly, it acquired Atlas energy, a move that is expected to boost domestic production of natural gas from The Marcellus shale beds.
Chevron also announced a 3.8% increase in its quarterly dividend, to $0.81 a share. In addition, it repurchased $1.25 billion of its common stock in the third quarter, thus adding to shareholder value.
Despite notably better-than-anticipated earnings, Chevron stock was up just modestly in late-morning trading, along with the rest of the energy sector, as investors appeared to take a breather after yesterday's broad market rally. Long term, we look for this blue-chip stock to garner decent total returns out to mid-decade. For 2011, we think the company will earn $3.54 a share in the fourth quarter, bringing our full-year estimate to $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 12/10 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.