Higher oil prices, slashed expenditure, and proceeds from asset sales helped Chevron Corporation (NYSE:CVX) to return to a first-quarter profit, easily beating analyst estimates. The oil giant is the second major player in the industry today to report favorable results for the quarter, with WTI trading up .29 percent on the day.
Chevron reported shortly before opening bell on Friday (and shortly after Exxon’s Q1 report) earnings of US$2.7 billion for the first quarter, compared with a loss of US$725 million for the same period of 2016. On a per-share basis, Chevron earned US$1.41 per diluted share in Q1 2017, beating by a mile analyst estimates for earnings per share, which were US$0.86.
Chevron’s earnings were boosted by a gain of around US$600 million from an upstream asset sale, by reduced operating expenses and lowered capital spending, and by higher oil prices in Q1 compared to the corresponding period of 2016.
The return to profit was not a huge surprise. According to analyst estimates compiled by Bloomberg, Chevron was expected to return to profit, while Zacks said earlier this week that the higher oil prices in Q1 2017 compared to the same period last year would help Chevron’s cash flows and upstream earnings. Still, Chevron managed to exceed those expectations.
In the upstream, Chevron’s U.S. upstream operations turned in a profit of US$80 million, compared with a loss of US$850 million a year earlier, due to higher crude oil realizations and lower depreciation and operating expenses. International upstream also swung to profit, of US$1.4 billion, from a loss of US$609 million a year earlier, in part due to a US$600-million gain from the sale of the Indonesia geothermal business, along with higher natural gas sale volumes and lower operating expenses.
In the downstream – of which Zacks analysts had said that could be a drag this quarter due to signs of weakness in refining – Chevron’s U.S. downstream boosted earnings to US$469 million from US$247 million in Q1 2016, on the back of lower operating expenses and higher margins on refined product sales. International downstream earnings dropped slightly to US$457 million from US$488 million, due to lower margins on refined product sales and foreign currency effects.
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Chevron’s cash flow from operations—one of the closely watched figures in oil majors’ balance sheets—jumped to US$3.9 billion from US$1.1 billion. The group continued to cut capital and exploratory expenditures, which stood at US$4.4 billion in Q1 2017, down from US$6.5 billion in Q1 2016.
Earlier this week, Chevron declared a quarterly dividend of US$1.08 per share, flat compared to the previous quarterly dividend announced in January.
By Tsvetana Paraskova for Oilprice.com
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