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Petroleum industry leader Chevron Corp. (CVXFree Chevron Stock Report) has reported adjusted fourth-quarter earnings per share of $1.49 versus our estimate of $1.57 and the year-earlier tally of $1.95. The figure excludes a major writeoff of natural gas properties, partly offset by a gain from the sale of pumping assets in the North Sea. Share profits also fell on a full-year basis, given a poor industry operating environment. Oil prices remain weak, having never fully recovered from a late-2018 selloff. Market sentiment has deteriorated even further lately, on the thinking that the China-based coronavirus will restrict travel, thereby keeping a lid on fuel demand. The stock sold off after the earnings announcement on a bad day for stocks overall.

Despite the business slump, Chevron is in good shape in terms of its balance sheet, cash flow, and asset-development program. The company is clearly benefiting from the earlier completion of a pair of large liquefied natural gas facilities in Australia. Production is rising as a result, but without a major ramp-up in spending. Capital and exploration expenditures rose a bit more than 4% for all of 2019, approximating the annual gain in combined oil and natural gas production. Those figures represent the type of cost-effective results that Wall Street would normally cheer if industry circumstances were more favorable.

Meanwhile, strong cash flow enabled the company to reduce total debt by $7 billion, year over year. Chevron's financial strength also shined through with the repurchase of $2.9 billion in stock over the past 12 months. Further buybacks are possible, too. Moreover, the quarterly dividend has been raised by 8%, to $1.29 per share, beginning with the March payment.

The company is also expanding through acquisitions. Chevron has agreed to buy a network of fuel terminals and service stations in Australia. That follows the purchase of a refinery in Texas in 2019. More deals could arise, given current industry weakness. Chevron would probably still like to build up its position in the Permian Basin of Texas and New Mexico after it dropped out of the bidding for Anadarko.

For now, the positives that Chevron is achieving internally are being outweighed by poor industry conditions. But this top-quality stock may well appeal to income-oriented investors, and could turn around nicely if a sustained upturn in oil prices were to develop.

About The CompanyChevron is one of the world’s largest oil company based on proven reserves. The company’s Upstream operations consist primarily of exploring for, developing, and producing crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transporting crude oil by major international oil export pipelines; transporting, storage, and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of refining crude oil into petroleum products; marketing of crude oil and refined products; transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.