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Chevron’s Negative Returns Drag Dow Down

Negative share returns by Chevron Corp. (NYSE: CVX) and Microsoft Corp. (NASDAQ: MSFT) have been dragging down the Dow Jones Industrial Average in Wednesday's intraday session. Chevron was down 2.7% while Microsoft had lost 1.6% at 12.30 pm ET with the two stocks accounting for 38 of the index’s 64-point drop on the day. Chevron has continued its poor start to the year, with CVX stock now down -3.7% in the year-to-date vs. +3.6% gain by the Energy Select Sector SPDR Fund (NYSEARCA: XLE). In contrast, Chevron’s close peer, Exxon Mobil Corp. (NYSE: XOM), has gained 7.7% YTD, continuing its stellar run that saw the stock rocket nearly 80% in 2022 thanks to an impressive 160% growth in earnings.

Chevron’s woes began three weeks ago after the company missed Q4 adjusted earnings expectations despite revenue exceeding expectations. The company reported Q4 net income rose to $6.35B, or $3.33/share, up from $5.05B, or $2.63/share, in the year-ago corresponding period. However, that marked a sharp fall from Q3 net income of $11.2B due to writedowns in international oil and gas operations. Meanwhile, Q4 revenues climbed 17% Y/Y to $56.47B while full year revenues totaled $246.3B, up from $162.5B the previous year.

However, it’s not all been bad press for CVX. Last month, Citi said that the time might be right for a U.S. oil giant such as Chevron or Exxon Mobil to buy either BP Plc.(NYSE: BP), Shell Plc (NYSE: SHEL) or TotalEnergies (NYSE: TTE) which the Wall Street bank reckons are trading at a massive 40% discount.

"The prize for the U.S. IOCs would look considerable, with value uplift coming through the ability to fund at a lower [cost of equity] as well as cost synergies that we estimate in [net present value] terms in the region of 15%-30% of target market cap," Citi said. The analyst says that European politicians are unlikely to directly oppose a sale due to the continent’s strong anti-oil sentiment and also noted that  the European firms would not have to spend as much on low-carbon investments.

By Alex Kimani for Oilprice.com

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