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Chevron Beats Q3 Earnings by a Whisker

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U.S. energy giant Chevron Corp. (CVX - Free Report) just about managed to beat third quarter earnings estimates on higher crude prices and a rise in output. Earnings per share (excluding adjustments for foreign-currency effects) came in at $2.71, a penny above the Zacks Consensus Estimate of $2.70.

However, Chevron’s performance deteriorated from the year-ago adjusted profit of $2.83 per share amid weak refining margins.

The integrated supermajor’s quarterly revenue moved up slightly (by 0.8%) year over year to $58,503.0 million. However, it was not enough to beat the Zacks Consensus Estimate of $59,346.0 million.

Exxon Mobil Corp. (XOM - Free Report) – the world's largest publicly traded oil company – reported higher-than-expected earnings yesterday, while European biggies Royal Dutch Shell plc (RDS.A - Free Report) and BP plc (BP - Free Report) came out with contrasting results. Shell missed estimates but BP beat earnings forecasts, apart from announcing a share repurchase program and a payout hike.

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas increased by 2.7% from the year-earlier level to 2,585 thousand oil-equivalent barrels per day (MBOE/d). Volume gains in U.S., project ramp-ups in Nigeria and Angola, together with a fall in maintenance-associated downtime at Kazakhstan’s Tengizchevroil joint venture were somewhat offset by normal field declines.

The U.S. output improved 2.8% year over year, while Chevron’s international operations (accounting for 75% of the total) delivered a 2.7% jump in volumes.

Notwithstanding gains on the production front and higher crude oil prices, upstream earnings declined marginally (by 0.9%) from the year-ago period – to $5,092.0 million – on the back of spiraling operating expenses.

Chevron’s production outlook remains one of the most robust in its peer group, with a number of major initiatives scheduled to come online during the next few years. Major start-ups during the last few months include the liquefied natural gas (LNG) project in Angola, deepwater Usan project in Nigeria and the Caesar/Tonga project in the deepwater Gulf of Mexico.

Amongst the major upcoming projects, Chevron’s Gorgon and Wheatstone natural gas initiatives in Australia are progressing well, while the Jack/St. Malo and Big Foot initiatives in the deepwater Gulf of Mexico remain on track for late 2014 start-up.

Downstream: Chevron’s downstream segment achieved earnings of $380.0 million, 44.8% lower than the profit of $689.0 million last year. The results were negatively influenced by lower refined product sales margins and higher repair/maintenance expenses in its domestic business. These factors were partially offset by better performance from the 50%-owned Chevron Phillips Chemical Company LLC.

Capital Expenditure, Balance Sheet & Share Repurchases

The second-largest U.S. oil company by market value after Exxon Mobil spent $10,585.0 million in capital expenditures during the quarter. Approximately 91% of the total outlays pertained to upstream projects.

As of Sep 30, 2013, the San Ramon, Calif.-based company had $17,014.0 million in cash and total debt of $18,581.0 million, with a debt-to-total capitalization ratio of about 11.4%. As part of the stock repurchase program announced in 2010, Chevron repurchased $1,250.0 million worth of shares in the third quarter.

Zacks Rank

Chevron currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

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