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Chevron (CVX) Q3 Earnings Top Estimates, Cost Cuts Help

Chevron Corporation CVX reported adjusted third-quarter earnings per share of 11 cents. The Zacks Consensus Estimate was of a loss of 29 cents. The outperformance reflects the integrated energy major’s successful cost reduction initiatives, which allowed it to lower operating expenses and capital spending by 12% and 48%, respectively, from year-ago levels in the face of falling commodity prices. Chevron follows European supermajors Royal Dutch Shell plc RDS.A and BP plc BP in posting a surprise profit.  

However, the bottom line compared unfavorably with the year-ago adjusted profit of $1.55 per share due to sharply lower oil and natural gas price realizations, plus decline in refined products margins.

The company, which recently entered into an agreement to sell its Appalachian assets to EQT Corp. EQT for $735 million, generated revenue of $24.5 billion. The sales figure missed the Zacks Consensus Estimate of $26 billion and was down 32.3% year over year.

Meanwhile, Chevron said that it would keep paying shareholders a quarterly dividend of $1.29 despite the difficult operating environment.

Chevron Corporation Price, Consensus and EPS Surprise

Chevron Corporation Price, Consensus and EPS Surprise
Chevron Corporation Price, Consensus and EPS Surprise

Chevron Corporation price-consensus-eps-surprise-chart | Chevron Corporation Quote

 

Segment Performance

Upstream: Chevron’s production of crude oil and natural gas decreased 6.6% from the year-earlier level to 2,834 thousand oil-equivalent barrels per day/MBOE/d (60% liquids) — the second consecutive quarter where volumes remained below 3 million barrels per day. The decline reflects output curtailment in reaction to the coronavirus-induced commodity price collapse, and the impact of asset dispositions. This was partly offset by improved production in a number of properties.

The U.S. output rose 5.1% year over year to 982 MBOE/d while the company’s international operations (accounting for 65% of the total) was down 11.8% to 1,852 MBOE/d. At $31 per barrel, Chevron’s average realized liquids prices in the U.S. were 34% below the year-earlier levels while prices overseas were down 30.4%.

The dual pressure of slumping oil and gas realizations and lower production meant that, Chevron’s upstream segment recorded a paltry profit of $235 million in the third quarter of 2020, declining steeply from $2.7 billion in the year-ago period.

Downstream: Chevron’s downstream segment profit came in at $292 million, compared to $828 million last year. The deterioration primarily underlined a fall in refined products sales margins.

Cash Flows, Capital Expenditure

The company recorded $3.5 billion in cash flow from operations, down from $7.9 billion a year ago. The plunge in cash flow could be attributed to lower price realizations in the upstream business.

In the third quarter, Chevron paid $2.4 billion in dividends.

The Zacks Rank #4 (Sell) company spent $2.6 billion in capital and exploratory expenditures during the quarter, down significantly from the year-ago period’s $5 billion. More than 78% of the total outlays pertained to upstream projects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Balance Sheet

As of Sep 30, the San Ramon, CA-based company had $6.9 billion in cash and cash equivalents and total debt of $34.8 billion, with a debt-to-total capitalization of about 20.9%.

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