Chevron Bucks Peers with $1bn Earnings Improvement
US major Chevron said May 1 it had earnings of $3.6bn in Q1 2020, a $1bn improvement over the comparable period a year ago, which it attributed to gains from asset sales, favourable tax items and foreign exchange effects. Sales and other operating revenues fell to $30bn from $34bn.
“First quarter earnings were up from a year ago, driven by downstream margins and increased Permian production,” CEO Michael Wirth said. “However, commodity prices fell significantly in March and the weakness continued into the second quarter, primarily due to reduced demand resulting from the Covid-19 pandemic.”
Upstream earnings slipped to $2.9bn from $3.1bn a year ago, Chevron said, but downstream profits rose to $1.1bn from $252mn.
Financial results in future periods, the company cautioned, are expected to be depressed as long as demand destruction and over-supply conditions persist.
“Chevron is responding to these unprecedented challenges by making changes to what we control, and with a commitment to protect the long-term health and value of the company,” Wirth said. “Our company entered this crisis well positioned with a strong balance sheet, flexible capital program and low breakeven price. These advantages will be important as we respond to challenging market conditions.”
In March, Chevron cut 2020 capital expenditure plans by 20%, to $16bn from $20bn; it has cut another $2bn from capex, and expects 2020 operating costs will decrease by $1bn. The company has also suspended share repurchases and completed additional asset sales, primarily in Azerbaijan and the Philippines.
“Together these actions are consistent with our longstanding financial priorities: to protect the dividend; to prioritise capital that drives long-term value; and to maintain a strong balance sheet,” Wirth added.
Chevron’s net natural gas production in the quarter averaged 7.6bn ft3/day, up from 6.97bn ft3/day in the comparable 2019 period, while net liquids production averaged 1.97mn b/d, up from 1.87mn b/d. Global oil-equivalent production rose 6% in the first quarter, to 3.24mn b/d – a new quarterly record, the company said.
