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Chevron: Weak 1Q Pre Earnings Update

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U.S. energy behemoth Chevron Corporation (CVX - Free Report) released its first quarter 2013 interim update, covering the first 2 months of the quarter. On the whole, the update is bearish, with oil production expected to be significantly below the previous quarter.

Chevron expects foreign exchange translation effect of $250–$350 million during the quarter.

Segmental Analysis

Upstream: The company’s oil and natural gas production averaged 2.636 million oil-equivalent barrels per day, up a nominal 0.2% from the first-quarter 2012 level. The improvement was aided by volume increases in the U.S. Production is likely to fall 1.2% sequentially.

In the first two months of the March quarter, Chevron’s total domestic oil equivalent production decreased 11,000 barrels per day from the previous quarter levels, primarily due to increased maintenance activity in the Gulf of Mexico. Net international oil equivalent production – at 1,973,000 oil-equivalent barrels per day – was 21,000 barrels per day less than the fourth quarter of 2012. The decrease was due to the timing of cost recovery volumes and weather-related downtime.

U.S. crude price realizations during Jan–Feb 2013 averaged $94.07 per barrel, up from $90.67 in fourth quarter 2012, while international realizations increased by $4.34 to $104.27 per barrel. Chevron’s domestic realized natural gas prices for this period averaged $3.06 per thousand cubic feet (Mcf), compared with $3.22 in the fourth quarter. Average international natural gas realizations were up 6 cents per Mcf to $6.03.

Downstream: Regarding downstream operations, the second-largest U.S. oil company by market value after Exxon Mobil Corporation (XOM - Free Report) said that its domestic. refinery crude-input fell 145,000 barrels per day, largely due to planned maintenance work at the Pascagoula, Mississippi refinery. Refinery crude-input volumes outside the U.S. were also down (by 61,000 barrels per day) during the same period due to increased maintenance activity at many refineries.

First quarter refining margins increased $2.90 per barrel sequentially on the U.S. West Coast and decreased by 87 cents per barrel on the Gulf Coast.

First Quarter Estimate

Chevron plans to release its quarterly results on Friday, Apr 26, 2013, before the opening bell. The Zacks Consensus Estimate for Chevron’s first quarter is $3.10 per share.

Zacks Rating

Chevron currently retains 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.

Two firms in the energy sector that are expected to significantly outperform the equity markets in the next one to three months are Calumet Specialty Products Partners LP (CLMT - Free Report) and Range Resources Corporation (RRC - Free Report) . Both these stocks carry a Zacks Rank #1 (Strong Buy).

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