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Will High Prices Boost Chevron's (CVX) Q2 Upstream Earnings?
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It's earnings season again and oil supermajor Chevron (CVX - Free Report) is gearing up to release its second-quarter results on Jul 29. This time around, the primary contributor to the company’s earnings — its upstream (or exploration and production) division — is likely to have benefited from the ongoing momentum in oil and natural gas prices. Chevron also has a downstream business, which refines crude oil into fuels like gasoline and diesel oil.
Chevron has extensive upstream operations in all major hydrocarbon-producing regions of the world. The Zacks Rank #2 (Buy) company is primarily involved in the acquisition, development and exploitation of crude oil and natural gas properties.
A Look at Chevron’s Upstream Performance in Q1
Chevron’s production of crude oil and natural gas decreased 2% from the year-earlier level to 3,060 thousand oil-equivalent barrels per day/MBOE/d (57% liquids) but it was the sixth successive quarter where volumes topped 3 million barrels per day. The year-over-year decline reflects normal field declines, entitlement effects and the end of the Rokan concession in Indonesia, which were partly offset by strength in the Permian Basin,the absence of weather-related impacts and no production curtailments.
The U.S. output was up 10.1% year over year to 1,184 MBOE/d, though the company’s international operations (accounting for 61% of the total) fell 8.3% to 1,876 MBOE/d.
Despite being pulled down by the dip in volumes, Chevron’s upstream segment recorded a profit of $6.9 billion in the first quarter of 2022, rocketing from the $2.4 billion earned in the year-ago period and beating the Zacks Consensus Estimate of $6.5 billion.
This was primarily on account of a significant improvement in commodity prices. At $77 per barrel, Chevron’s average realized liquids prices in the United States were 60.4% above the year-earlier levels, while prices overseas jumped 66.1%. On the natural gas front, its realizations soared 90.7% in the United States and 87.9% overseas.
Higher Oil, Gas Prices to Boost Q2 Upstream Income
Benchmark oil prices have remained strong in 2022, thanks to Russia’s launch of military operations in Ukraine. With the conflict showing no signs of a quick resolution and the European Union following the United States in blocking imports of Russian energy, global supply remains strained amid resilient demand.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the second-quarter average sales price for crude is pegged at $97 per barrel, up significantly from a year earlier when the company had fetched $54 in the United States and $62 overseas.
Although the company maintains an oil-heavy production mix, natural gas still contributes more than 40% to the total volume. This healthy exposure to natural gas could also work in Chevron’s favor as the price of natural gas has soared from the year-ago levels. As a matter of fact, the consensus mark for the second-quarter average sales price for natural stands at $9.04 per thousand cubic feet compared to $2.16 (U.S.) and $4.92 (international) in the corresponding period of 2021.
Chevron, like its peer ExxonMobil (XOM - Free Report) , is set to benefit from the spike in crude and natural gas prices. For the to-be-reported quarter, the Zacks Consensus Estimate for the upstream segment is pegged at a profit of $7.5 billion, indicating a massive jump from the prior-year quarter’s income of $3.2 billion.
As far as ExxonMobil’s upstream segment is concerned, the massive improvement in commodity prices could have increased second-quarter 2022 earnings by up to $3.3 billion from the previous quarter’s levels. Per a recent filing, Zacks #2 Ranked XOM expects operating profits from oil and gas operations of up to $11 billion, the highest for any quarter since 2017.
ExxonMobil expects operating results in the second quarter from the oil and liquids businesses to reflect an improvement of $1-$1.4 billion from that reported in the March-end quarter of 2022. The improvement in natural gas prices is likely to have contributed $1.5-$1.9 billion to the upstream business’s profits, as estimated by XOM.
Overall Earnings & Revenue Projections
Coming back to CVX, the Zacks Consensus Estimate for second-quarter earnings is pegged at $5.01 per share, suggesting a 193% surge on the prior-year quarter’s reported figure of $1.71. For quarterly sales, the consensus mark of $55.8 billion suggests a rise of 48.5% from the year-earlier quarter’s reported number.
Important Energy Releases So Far
While we wait till Friday for CVX and XOM to come out with their respective Q1 numbers, let’s take a look at two key energy releases so far.
Schlumberger (SLB - Free Report) , the largest oilfield contractor, announced second-quarter earnings of 50 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 40 cents. SLB recorded total revenues of $6.8 billion, outpacing the Zacks Consensus Estimate by 7.8%.
Schlumberger’s strong quarterly earnings resulted from higher sales of exploration data licensing and strong drilling activities in land and offshore resources in North America and the international market. In more good news for investors, SLB revised its 2022 revenue outlook upward to at least $27 billion. This reflects that it expects year-over-year revenue growth in the high-teens compared with the prior projection of mid-teens. Increased participation in growth of drilling and completion activities across the world brightened Schlumberger’s outlook.
Smaller rival Halliburton (HAL - Free Report) reported second-quarter adjusted net income per share of 49 cents, surpassing the Zacks Consensus Estimate of 45 cents and well above the year-ago quarter profit of 26 cents. HAL’s outperformance reflects stronger-than-expected profit from both its divisions.
Meanwhile, revenues of $5.1 billion were 36.9% higher than the corresponding period of 2021 and came ahead of the Zacks Consensus Estimate of $4.7 billion. North American revenues rose 54.6% year over year to $2.4 billion, while revenues from Halliburton’s international operations were up 23.9% from the year-ago period to $2.6 billion. Investors should know that HAL has outsized exposure to the North American land drilling market.
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Will High Prices Boost Chevron's (CVX) Q2 Upstream Earnings?
It's earnings season again and oil supermajor Chevron (CVX - Free Report) is gearing up to release its second-quarter results on Jul 29. This time around, the primary contributor to the company’s earnings — its upstream (or exploration and production) division — is likely to have benefited from the ongoing momentum in oil and natural gas prices. Chevron also has a downstream business, which refines crude oil into fuels like gasoline and diesel oil.
Chevron has extensive upstream operations in all major hydrocarbon-producing regions of the world. The Zacks Rank #2 (Buy) company is primarily involved in the acquisition, development and exploitation of crude oil and natural gas properties.
A Look at Chevron’s Upstream Performance in Q1
Chevron’s production of crude oil and natural gas decreased 2% from the year-earlier level to 3,060 thousand oil-equivalent barrels per day/MBOE/d (57% liquids) but it was the sixth successive quarter where volumes topped 3 million barrels per day. The year-over-year decline reflects normal field declines, entitlement effects and the end of the Rokan concession in Indonesia, which were partly offset by strength in the Permian Basin,the absence of weather-related impacts and no production curtailments.
The U.S. output was up 10.1% year over year to 1,184 MBOE/d, though the company’s international operations (accounting for 61% of the total) fell 8.3% to 1,876 MBOE/d.
Despite being pulled down by the dip in volumes, Chevron’s upstream segment recorded a profit of $6.9 billion in the first quarter of 2022, rocketing from the $2.4 billion earned in the year-ago period and beating the Zacks Consensus Estimate of $6.5 billion.
This was primarily on account of a significant improvement in commodity prices. At $77 per barrel, Chevron’s average realized liquids prices in the United States were 60.4% above the year-earlier levels, while prices overseas jumped 66.1%. On the natural gas front, its realizations soared 90.7% in the United States and 87.9% overseas.
Higher Oil, Gas Prices to Boost Q2 Upstream Income
Benchmark oil prices have remained strong in 2022, thanks to Russia’s launch of military operations in Ukraine. With the conflict showing no signs of a quick resolution and the European Union following the United States in blocking imports of Russian energy, global supply remains strained amid resilient demand.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the second-quarter average sales price for crude is pegged at $97 per barrel, up significantly from a year earlier when the company had fetched $54 in the United States and $62 overseas.
Although the company maintains an oil-heavy production mix, natural gas still contributes more than 40% to the total volume. This healthy exposure to natural gas could also work in Chevron’s favor as the price of natural gas has soared from the year-ago levels. As a matter of fact, the consensus mark for the second-quarter average sales price for natural stands at $9.04 per thousand cubic feet compared to $2.16 (U.S.) and $4.92 (international) in the corresponding period of 2021.
Chevron, like its peer ExxonMobil (XOM - Free Report) , is set to benefit from the spike in crude and natural gas prices. For the to-be-reported quarter, the Zacks Consensus Estimate for the upstream segment is pegged at a profit of $7.5 billion, indicating a massive jump from the prior-year quarter’s income of $3.2 billion.
As far as ExxonMobil’s upstream segment is concerned, the massive improvement in commodity prices could have increased second-quarter 2022 earnings by up to $3.3 billion from the previous quarter’s levels. Per a recent filing, Zacks #2 Ranked XOM expects operating profits from oil and gas operations of up to $11 billion, the highest for any quarter since 2017.
You can see the complete list of today’s Zacks #1 Rank stocks here.
ExxonMobil expects operating results in the second quarter from the oil and liquids businesses to reflect an improvement of $1-$1.4 billion from that reported in the March-end quarter of 2022. The improvement in natural gas prices is likely to have contributed $1.5-$1.9 billion to the upstream business’s profits, as estimated by XOM.
Overall Earnings & Revenue Projections
Coming back to CVX, the Zacks Consensus Estimate for second-quarter earnings is pegged at $5.01 per share, suggesting a 193% surge on the prior-year quarter’s reported figure of $1.71. For quarterly sales, the consensus mark of $55.8 billion suggests a rise of 48.5% from the year-earlier quarter’s reported number.
Important Energy Releases So Far
While we wait till Friday for CVX and XOM to come out with their respective Q1 numbers, let’s take a look at two key energy releases so far.
Schlumberger (SLB - Free Report) , the largest oilfield contractor, announced second-quarter earnings of 50 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 40 cents. SLB recorded total revenues of $6.8 billion, outpacing the Zacks Consensus Estimate by 7.8%.
Schlumberger’s strong quarterly earnings resulted from higher sales of exploration data licensing and strong drilling activities in land and offshore resources in North America and the international market. In more good news for investors, SLB revised its 2022 revenue outlook upward to at least $27 billion. This reflects that it expects year-over-year revenue growth in the high-teens compared with the prior projection of mid-teens. Increased participation in growth of drilling and completion activities across the world brightened Schlumberger’s outlook.
Smaller rival Halliburton (HAL - Free Report) reported second-quarter adjusted net income per share of 49 cents, surpassing the Zacks Consensus Estimate of 45 cents and well above the year-ago quarter profit of 26 cents. HAL’s outperformance reflects stronger-than-expected profit from both its divisions.
Meanwhile, revenues of $5.1 billion were 36.9% higher than the corresponding period of 2021 and came ahead of the Zacks Consensus Estimate of $4.7 billion. North American revenues rose 54.6% year over year to $2.4 billion, while revenues from Halliburton’s international operations were up 23.9% from the year-ago period to $2.6 billion. Investors should know that HAL has outsized exposure to the North American land drilling market.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.