Chevron beats earnings estimates but profit falls on lower refining margins and natural gas prices

Finance

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Gas pumps are seen at a Chevron gas station in Orlando. 
Paul Hennessy | SOPA Images | Lightrocket | Getty Images

Chevron beat earnings expectations Friday, but its profit fell from the year-ago period as its refineries and international gas business faced headwinds.

The oil major’s net income declined 16% to $5.5 billion, or 2.97 per share, compared with the same quarter a year ago. Excluding one-time items, Chevron reported earnings of $2.93 per share, which beat Wall Street estimates.

Chevron attributed declining profits to lower sales margins at its refineries and lower natural gas prices eating into profits in international production.

Oil prices have gained more than 15% this year and gasoline futures are up 31%, but the rally did little to lift profits given trouble elsewhere in the energy industry.

Natural gas prices have plummeted 35% this year due to a supply glut. Retail and distribution margins for gasoline, or the difference between the retail and refining prices, were also lower in February and March compared with the same period last year, according to the Energy Information Administration.

Here is what Chevron reported for the first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG: 

  • Earnings per share: $2.93 adjusted vs. $2.87 expected
  • Revenue: $48.72 billion vs. $50.66 billion expected

Chevron’s refining business in the U.S. saw earnings plummet by more than half to $453 million. Profits in international refining took an even bigger hit, falling nearly 60% to $330 million. 

The U.S. oil and gas business booked earnings of about $2 billion, a 16% increase over the prior-year period due to higher sales volume. Chevron produced 1.57 million barrels of oil and gas daily in the U.S. for the quarter, an increase of 35%, or 406,000 bpd, from a year ago.

The oil major attributed the production gains to strong output in the Permian and the Denver-Julesburg basins. 

International oil and gas earnings fell 6% to $3.2 billion as production fell by 39,000 barrels to 1.77 million bpd due to maintenance in Nigeria and field declines. Still, total worldwide production increased 12% to 3.35 million bpd — its highest first-quarter output on record.

Capital expenditures rose to $4.1 billion, a 37% increase over the $3 billion spent in the year-ago period. The higher spending was on its oil and gas production and old assets from PDC Energy after completing its acquisition of the company last August.

Chevron still paid out $3 billion in dividends and repurchased nearly $3 billion of its shares in the quarter, though its return on capital of 12.4% was lower than the 14.6% in first quarter last year.

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