CVX Misses on Refining Weakness

Highlights include Chevron Corp. (CVX - Analyst Report), Exxon Mobil Corp. (XOM - Analyst Report), BP plc (BP - Snapshot Report) and ConocoPhillips (COP - Analyst Report).

Earlier today, Chevron Corp. (CVX - Analyst Report) reported weaker-than-expected first-quarter 2009 recurring EPS of $0.72, significantly below the year-earlier level of $2.48. The reported EPS number of $0.92 included one-time gains on sales of downstream assets totaling $400 million or $0.20 per share, which we exclude from our recurring EPS estimate.

Contribution from increased production of crude oil and natural gas due to the start-up of new projects was offset by the sharp decline in commodity prices. This has been a recurring theme in oil company results this quarter, as we saw with Exxon (XOM - Analyst Report) yesterday and BP (BP - Snapshot Report) and ConocoPhillips (COP - Analyst Report) earlier.

Chevron's total production of crude oil and natural gas increased by 2.5% from the year-earlier level to 2.7 million oil-equivalent barrels per day (BOE/d), driven by new project start-ups and the impact of lower prices on production entitlements.

Partly offsetting these positives were factors such as OPEC quota restrictions and production still shut in due to last year's Gulf of Mexico (GoM) hurricanes. Approximately 35,000 barrels per day (Bbl/d) of GoM production still remains offline due to the lingering effects of last September's hurricanes.

Similarly, OPEC restrictions curtailed production by approximately 50,000 Bbl/d during the quarter. Gains on the production front were offset by lower realized oil and natural gas prices, resulting in a roughly 75% year-over-year drop in upstream earnings to $1.3 billion.

Chevron's production outlook remains one of the most robust in its peer group, with a number of major deepwater projects scheduled to come online later this year. These include the Tahiti in the GoM, Tombua-Landana in Angola, and Frade in Brazil.

Downstream earnings (excluding the $400 million gain associated with the sale of marketing assets in Brazil and Nigeria) increased 67% from the last year's depressed level, driven by margin improvements in the U.S. Earnings in the chemicals business were roughly half the year-earlier level, as margins were lower on lubricants and fuel additives.

Chevron spent $6.5 billion in capital expenditures during the quarter, up from last year's 5.1 billion. Approximately 85% of the total outlays pertained upstream projects. At the end of the quarter, the company had $9.2 billion in cash and long-term debt of $12.2 billion, with a debt-to-total capitalization ratio of about 12%.