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Chevron Misses, Reports Profit Dip

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U.S. energy giant Chevron Corp. (CVX - Free Report) reported weak first quarter results amid lower crude prices.

Earnings per share (excluding adjustments for foreign-currency effects) came in at $3.05, below the Zacks Consensus Estimate of $3.08 and the previous year's $3.39.

The integrated supermajor’s quarterly revenue decreased 6.4% year over year to $56,818.0 million from $60,705.0 million, and was 5.4% below the Zacks Consensus Estimate.

Exxon Mobil Corp. (XOM - Free Report) – the world's largest publicly traded oil company – reported better-then-expected earnings yesterday, while European biggies Royal Dutch Shell plc (RDS.A - Free Report) and BP plc (BP - Free Report) are scheduled to come out with numbers next week.

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas increased by a marginal 0.5% from the year-earlier level to 2,645 thousand oil-equivalent barrels per day (MBOE/d). Volume gains in U.S. and Nigeria as well as contribution from the newly bought Delaware Basin assets were somewhat negated by normal field declines and the continued shut-in of the Frade deepwater field in Brazil.

The U.S. output improved 2.0% year over year, while Chevron’s international operations (accounting for 75% of the total) delivered flat volumes. However, gains on the production front – albeit small – were more than offset by depressed crude oil prices and higher domestic operating expenses, with the net effect resulting in a 4.1% year-over-year decline in upstream earnings to $5,916.0 million.

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 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 2014 start-up.

Downstream: Chevron’s downstream segment achieved earnings of $701 million, 12.8% lower than the profit of $804.0 million last year. The results were negatively influenced by weak domestic operations that suffered from higher operating expenses and lower margins on refined product sales. To an extent, these factors were offset by increased earnings from the 50%-owned Chevron Phillips Chemical Company LLC and better profit margins abroad.

Capital Expenditure, Balance Sheet & Share Repurchases

The second-largest U.S. oil company by market value after Exxon Mobil spent $8,882.0 million in capital expenditures during the quarter. Approximately 93% of the total outlays pertained to upstream projects.

As of Mar 31, 2013, the San Ramon, California-based company had $17,374.0 million in cash and total debt of $14,143.0 million, with a debt-to-total capitalization ratio of about 9.2%. As part of the stock repurchase program announced in 2010, Chevron repurchased $1,250.0 million worth of shares in the first quarter.

Dividend Hiked

Recently, the company announced an 11.1% increase in its quarterly dividend to $1.00 per share, or $4.00 per share annualized. The dividend is payable on Jun 10 to shareholders of record on May 17, 2013.

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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