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Chevron (CVX) Sets $3B Buyback Plan Even as Q2 Earnings Miss

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Chevron Corporation (CVX - Free Report) reported weaker-than-expected second-quarter earnings, pressured by drop in profits in its downstream business, which refines crude oil into fuels like gasoline and diesel oil. The U.S. energy major reported earnings per share of $1.78, lagging the Zacks Consensus Estimate of $2.06.

However, the bottom line improved significantly from the year-ago profit of 77 cents amid the recovery in oil prices and production gains.

Quarterly revenue of $42,236 million beat the Zacks Consensus Estimate of $40,780 and was up 22.5% year over year.

Chevron Corporation Price, Consensus and EPS Surprise

 

Chevron Corporation Price, Consensus and EPS Surprise | Chevron Corporation Quote

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas increased 1.7% compared with last year’s corresponding period to 2,826 thousand oil-equivalent barrels per day (MBOE/d). The U.S. output rose 5.4% year over year to 701 MBOE/d but the company’s international operations (accounting for 74% of the total) remained essentially flat at 2,087 MBOE/d.

Apart from the shale assets in the prolific Permian Basin, the rise in output could be attributed to contributions from major capital projects – Gorgon and Wheatstone LNG developments in Australia.

The rise in production was supported by higher oil realizations, the result being a healthy improvement in Chevron’s upstream segment profit – from $853 million in the year-earlier quarter to $3,295 million.

Downstream: Chevron’s downstream segment achieved earnings of $838 million, 29.9% lower than the profit of $1,195 million last year. The decline primarily underlined a fall in refined products sales margins in its international operations.

Cash Flows, Buybacks

Importantly, Chevron delivered a good cash flow performance this quarter – an important gauge for the oil and gas industry – with $6,855 million in cash flow from operations, up from $4,971 million a year ago. The significant cash flow allowed the company to announce a $3 billion per year share buyback program.

Capital Expenditures

The Zacks Rank #3 (Buy) company spent $4,816 million in capital expenditures during the quarter, up from the year-ago period’s $4,538 million. Roughly 88% of the total outlays pertained to upstream projects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Balance Sheet

As of Jun 30, 2018, the San Ramon, CA-based company had $7,628 million in cash and total debt of $38,517 million, with a debt-to-total capitalization ratio of about 20.2%.

Earnings Schedules of Other Oil Supermajors

Among the major integrated players, Royal Dutch Shell and ExxonMobil (XOM - Free Report) failed to meet expectations, while BP plc (BP - Free Report) will report second-quarter earnings early next week.

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