Natural Gas and Crude Production Increases Help Chevron Top Analysts in First Quarter

Andrew Klips |

Natural Gas and Crude Production Increases Help Chevron Top Analysts in First QuarterThe Dow slipped into the red after a first-quarter gross domestic product in the U.S. failed to live up to expectations Friday morning, but is fighting its way back as the weekend approaches. Dow component Chevron Corp. (CVX) has been trying to do its part to buoy the industrial index after reporting profits in the first quarter that topped analyst predictions, despite lower oil prices chewing into its sales and earnings.

From the start of 2013 to March 30, brent crude prices dropped nearly 5 percent to average about $112.6 per barrel.

Total revenue for the quarter at San Ramon, California-based Chevron slid to $56.82 billion, down from $60.71 billion in the year prior quarter. Net profit for the quarter was $6.18 billion, or $3.18 per share, versus $6.47 billion, or $3.27 per share in Q1 2012.

Analysts were expecting the second biggest oil company in the U.S. to post EPS of $3.09.

"Our first quarter earnings were strong," said John Watson, chairman and chief executive at Chevron. "Our consistent financial performance has enabled us to significantly increase the dividend again, and fund major development projects that are the foundation of the company's future growth in production, earnings and cash flows."

Watson was referencing the board’s approval of an 11 percent hike in the quarterly dividend to $1.00 per share, payable in June.

In a surprise that surpassed corporate outlook by about 1 percent, Chevron produced 2.65 million barrels of oil equivalent per day, up from 2.63 million bpd in the first quarter last year. “Upstream” earnings in the U.S. were down by $397 million from the year prior quarter to $1.13 billion, the result of lower crude oil realizations and higher operating expenses. Upstream earnings internationally offset some of those declines, increasing $142 million to $4.8 billion.

Increasing crude production has been a challenge for majors. On Thursday, the world’s biggest energy company, Exxon Mobil Corp. (XOM), reported a decrease in production in the first quarter. Exxon’s earnings were essentially flat for the first quarter.

Chevron has a goal of a 25 percent increase in output by 2017. A factor in this is getting in natural gas plant in Angola online after facing several delays. The company said that it expects start-up this quarter and full capacity to be reached by the end of the year.

“Downstream” domestic earnings, those generated by its refining and marketing business, were lowered to $135 million from $459 million in Q1 2012. The company partially blamed turnaround activities at refineries in El Segundo, California and Pascagoula, Mississippi for the lower earnings. Again, international downstream earnings picked-up part of the slack, rising to $566 million from $345 million last year.

Natural gas production increased 3.2 percent during the quarter with Chevron selling about 10.6 billion cubic feet of gas per day.

Chevron shares are up by a little over 1 percent with the earnings beat. With the move, shares are up more than 11 percent so far in 2013, outpacing bigger rival Exxon, which is up about 4 percent this year.

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Companies

Symbol Name Price Change % Volume
CVX Chevron Corporation 102.71 1.44 1.42 3,215,086
EQY Equity One Inc. 30.76 -0.09 -0.29 270,582
XOM Exxon Mobil Corporation 87.26 0.80 0.93 5,142,822

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