Chevron joins oil majors with weaker results

Chevron, the second-ranked US oil major by market capitalisation, delivered a fall in second-quarter revenues from $63bn to $57bn that was in line with consensus forecasts. However, a fall in net income from $7.2bn to $5.4bn equated to earnings per share of $2.77 that was slightly below the consensus of analysts forecasts of $2.98 ahead of the results statement. In common with other major US and European oil companies that have announced quarterly figures over the past week, Chevron’s revenues were hit by year-on-year declines in the prices commanded by its output of crude oil and refined products during the quarter. The oil group was hit by a year-on-year fall from $97 to $92 in the average selling price of crude oil and gas liquids achieved in the three months to June, though gas prices rose from $2.17 to $3.78 per thousand cubic feet.

But Chevron was also hit by a fall small in overall production and, in common with its larger rival ExxonMobil, which reported a miss on earnings on August 1, also delivered a sharp decline in profits at its refining business. US downstream earnings fell from $802m to just $138m. “Our second-quarter earnings were down from the very strong level of a year ago,” said Chevron’s chairman John Watson. “The decrease was largely due to softer market conditions for crude oil and refined products. Earnings were also reduced as a result of repair and maintenance activities in our US refineries.”

In spite of the fall in net income, Chevron continued to commit more funds aimed at raising production in the long term. Capital and exploratory expenditures in the first six months of 2013 were $18.3bn, compared with $14.2bn last time round. During the quarter, Chevron loaded the first cargo of liquefied natural gas at its Angola LNG project, described by Mr Watson as one of the largest energy projects on the African continent. Since the end of the quarter, Chevron also reached a final agreement to invest $1.24bn in the Vaca Muerta shale formation. The formation was the principal asset of YPF. The move made it the first international oil group to invest in Argentina since it nationalised the stake held by Repsol of Spain in YPF last year.

Two weeks ago, Repsol described Chevron’s actions as “scandalous” and in violation of “the most elementary ethical principles”. Chevron is also targeting upstream investment in Canadian shale fields, the Kurdish region of Iraq and deep water blocks off the coast of Brazil. In spite of accelerating capital expenditure to boost production, Chevron saw its worldwide production slip from 2.62m to 2.58m barrels of oil equivalent a day during the second quarter. “Production increases from project ramp-ups in the United States and a project start-up in Angola were more than offset by normal field declines,” said the company.

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