Chevron Beats On Refining Profits

Chevron Corporation (CVX) reported better-than-expected second-quarter 2009 earnings, driven by robust upstream volumes and improved downstream results. Earnings per share, excluding foreign-currency effects, came in at $1.10, above the Zacks Consensus Estimate of $0.95.

On a year-over-year basis, Chevron’s adjusted earnings per share plunged 62.8%, while revenue declined 51.6% to $40.2 billion, reflecting lower prices for crude oil and natural gas.

Upstream Earnings Plummet: Increased Volumes Offset By Lower Prices

Chevron’s total production of crude oil and natural gas increased by 5.2% from the year-earlier level to 2.7 million oil-equivalent barrels per day (BOE/d), driven by new project start-ups and the impact of lower prices on production entitlements. Partly offsetting these positives were factors such as OPEC quota restrictions, which curtailed production by approximately 35,000 Bbl/d during the quarter.

Gains on the production front were offset by lower realized oil and natural gas prices, resulting in a roughly 79% year-over-year drop in upstream earnings to $1.5 billion.

But Production Outlook Remains Solid

Chevron’s production outlook remains one of the most robust in its peer group, with a number of major deepwater projects scheduled to come online later this year. During the most recent quarter, major project start-ups include Tahiti in the Gulf of Mexico and Frade offshore Brazil. Another deepwater project, Tombua-Landana in Angola is expected to become operational later this year.

Downstream Segment Swings to Profit

Chevron’s downstream segment earned $161 million during the quarter as against a loss of $734 million in the previous-year period. Despite demand for refined products remaining depressed, the company managed to post significantly better results on the back of decreased operating expenses, improved international margins, as well as increased refinery crude-input.

Chemicals

Earnings in the chemicals business increased 163.4% year-over-year to $108 million, reflecting higher margins on the sale of lubricant and fuel additives in tandem with lower utility and manufacturing costs.

Capital Expenditure & Balance Sheet

Chevron spent $4.9 billion in capital expenditures during the quarter, down from last year’s 5.2 billion. Approximately 75% of the total outlays pertained to upstream projects. At the end of the quarter, the company had $7.2 billion in cash and long-term debt of $12.1 billion, with a debt-to-total capitalization ratio of about 12%.

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