Refining Margins are Q3 Curse for Super-Majors, Chevron (CVX)

Michael Teague |

The current week’s batch of earnings announcements for the recently-ended period has seen the oil & gas “super-majors” reporting throughout the week.

With BP Plc (BP) perhaps the only exception, the world’s largest oil companies, Total SA (TOT) , Royal-Dutch Shell ($RDS.A), and ExxonMobil (XOM) have all reported earnings this week, and have all been severely impacted by downstream operations, particularly in the area of refining margins. On Friday Chevron (CVX) joined the club, with the release of its earnings before the opening bell to the consternation of investors.

Chevron’s Q3 net earnings were $4.95 billion, or $2.57 per share on revenue of $58.5 billion, down from the prior year’s net income of $5.25 billion, or $2.69 per share, but an increase on revenue of $55.6 billion. The company fell short of the average of analyst estimates that had EPS at $2.71 on revenue of $59.35 billion.

Like its US peer ExxonMobil, Chevron reported an increase overall in production of oil and gas of 2.7 percent on the prior year to 2.585 million barrels of oil and equivalents per day. The increase in output was the same in domestic and foreign operations.

But even with the increase in production and the relatively higher prices of crude during the period, downstream operations presented a serious problem for the company. Net earnings for the downstream segment, $380 million were about 45 percent lower than the prior year, which in turn was the result of maintenance expenses, as well as shrinking sales margins for refined products.

Still, the production figures are promising, considering that the company is nearly ready to go online with projects in the works in Nigeria, Angola, the Gulf of Mexico, and Khazakhstan.

Shares for the oil and gas giant had dropped over two percent to as low as $117 per share at one point, before paring back slightly to $118.05 per share ahead of the closing bell.

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Companies

Symbol Name Price Change % Volume
CVX Chevron Corporation 114.44 1.68 1.49 6,434,127
TOT Total S.A. 49.13 0.70 1.45 1,415,042
XOM Exxon Mobil Corporation 88.07 0.51 0.58 11,182,628
BP BP p.l.c. 35.89 0.32 0.90 6,006,667
ADDC Addmaster Corp. 12.75 0.00 0.00 0
RDSA Royal Dutch Shell Plc ADR Sponsored Repstg A Shs n/a n/a n/a 0

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