Chevron Q4’s Earnings Underwhelm

Chevron (NYSE:CVX) reported on Friday a $2-billion windfall from the U.S. tax reform in Q4, but excluding this one-time benefit, its earnings per share missed by a mile analyst expectations, as refining margins started to weaken at the end of last year as oil prices rallied.

Including the tax benefit, Chevron reported earnings of $3.1 billion, or $1.64 per share for Q4 2017, compared with $415 million, or $0.22 per share, in Q4 2016. The corporation, however, did not report what its quarterly earnings were excluding the tax gain, leaving analysts initially puzzled about the comparison between the underlying earnings and Wall Street forecasts.

Excluding the tax benefit, Chevron’s EPS badly missed expectations—it earned $0.72 per share in Q4, compared to $1.22 per share expected by Thomson Reuters I/B/E/S.

In the upstream, Chevron reported earnings of $3.69 billion in its U.S. operations in Q4, compared to earnings of $121 million in Q4 2016, but the earnings jump was actually a Trump bump due to a $3.33-billion benefit from the tax reform. In the international upstream operations, Chevron posted earnings of $1.60 billion in Q4, up from $809 million a year ago, chiefly thanks to the higher crude oil prices.

In the downstream, U.S. earnings were $1.20 billion in Q4, but again—thanks to a $1.16-billion tax benefit. International downstream operations, however, took a hit, with lower margins sending earnings plunging to $84 million in Q4 2017 from $357 million a year earlier.

On the bright side, last year Chevron had its best year for oil and natural gas discoveries since 2011. The supermajor added around 1.54 billion barrels of net oil-equivalent proved reserves last year. The reserves additions—subject to final reviews—are equal to some 155 percent of the oil and natural gas volumes that Chevron produced in 2017. The largest additions came from the Permian Basin and the Gorgon Project in Australia.

Chevron shares were down 4.14% at 1:53 p.m. EST on the NYSE today, joining ExxonMobil (NYSE:XOM) whose shares were plunging nearly 6% at the same time, after Exxon also reported underwhelming earnings for Q4.

By Tsvetana Paraskova for Oilprice.com

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