Chevron kicks off oil industry’s Q4 results with a miss

A Chevron gas station sign is seen in Del Mar, California, in this April 25, 2013 photo. REUTERS/Mike Blake

HOUSTON, Jan 28 (Reuters) – Chevron Corp (CVX.N) on Friday reported a fourth quarter profit that missed Wall Street estimatesand offered a weak outlook for this year’s oil and gas production, sending its shares lower.

The first major oil company to report fourth quarter results posted earnings of $5.1 billion, or $2.65 a share. Analysts had forecast a $3.12 per share profit, Refinitiv showed, expecting a bigger boost from rebounding prices.

The below-par profit came despite higher oil and gas prices that were expected to lift results for the top energy companies. Exxon Mobil Corp (XOM.N) reports fourth quarter earnings on Tuesday and Shell Plc (RDSa.L) on Thursday.

“The miss was driven by international upstream primarily,” said Biraj Borkhataria, deputy head of European research at RBC Capital Markets. “Downstream earnings also disappointed, with weakness across both refining and chemicals.”

Chevron’s oil and gas production fell 5% to 3.12 million barrels per day (bpd) with the largest drop coming from the loss of Indonesian and Thai production licenses. It also took a $575 million hit from timing of bookings in its liquefied natural gas (LNG) business.

Full-year earnings of $15.6 billion were the best since 2014 and compare with a $5.5 billion loss in 2020. Chevron, as other major oil producers, deeply cut spending as the COVID-19 pandemic slashed oil demand. Its project outlays fell to $11.7 billion last year, down from $20.22 billion in 2019.

Investors had this week pushed Chevron shares to an all-time high on expectations that rising oil prices would drive earnings. Shares were down 3.7% at $130.35 in early trading. read more

“A weak performance across the board,” Jefferies analysts wrote, adding that a forecast for weaker production this year was “likely to disappoint.”

Chevron projected oil and gas production would be flat to 3% less this year due contract expirations in Indonesia and Thailand that it no longer viewed as competitive.

Operating results were below analyst forecasts in its oil and gas production and refining businesses. Operating profit was $5.2 billion, up from $501 million in the same period a year ago, but below analyst expectations for about $6.6 billion operating profit.

Fourth quarter earnings from refining were $760 million, down from the $1.31 billion in the third quarter but up from a loss of $338 million year-on-year. The downstream business suffered lower chemical margins and volumes, Chevron said.

But higher results than a year ago enabled Chevron to increase shareholder returns and pay down debt.

There was “an impressive $6 billion reduction” in outstanding debt, said Peter Speer, senior vice-president at credit-rating firm Moody’s Corp.

The company said itwill buy back about $1.25 billion in shares during the first quarter, at the higher end of its guidance. Chevron also raised its dividend by 6% to $1.42 per share this week.

“I expect 2022 will be even better for cash returned to shareholders,” Chief Executive Michael Wirth said in prepared remarks. “We’re more capital and cost efficient, enabling us to return more cash to shareholders.”

Chevron sharply cut spending on new projects in 2020 as the pandemic took its toll, a move that helped profits soar as oil and gas prices rebounded. The benchmark oil price last quarter averaged $79 per barrel compared with $43 a year earlier.

Reporting by Sabrina Valle, Gary McWilliams and Shariq Khan; Editing by Edmund Blair and Marguerita Choy

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