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Chevron profit fell 29% in Q1

May 05/2021

MOSCOW (MRC) -- Chevron's first-quarter profit fell 29% from the same period a year ago as gains from oil and gas prices were undercut by weaker refining margins, production losses and the impact of an asset sale that benefited results last year, said Hydrocarbonprocessing.

Oil companies are generally enjoying a recovery in energy prices, up at least a third this year, after the pandemic hammered demand at the start of 2020. Chevron and its peers slashed spending, paving the way for several firms to post sharply better results.

But as European rivals topped forecasts, Chevron's earnings declined on winter storm production losses, weaker margins and the absence of asset and tax items that benefited year-ago profit. "Results were down from a year ago due in part to ongoing downstream margin and volume effects resulting from the pandemic and the impacts of winter storm Uri," Michael Wirth, Chevron's chief executive officer, said, referring to the plunging temperatures that hit Texas and other states in February.

The winter storm cost USD300 million in lost production and repairs, said finance chief Pierre Breber. "That's lost production in the Permian Basin and lost production in refining and chemicals," he said. Chevron, the second-largest U.S. oil producer, reported a profit of USD1.72 billion, or 90 cents per share, compared with USD2.45 billion, or USD1.31 per share, a year earlier. Year-ago results included about USD680 million in asset sales and favorable tax items.

Net profit was USD1.4 billion, or 72 cents a share, down from USD3.6 billion, or USD1.93 cents a share, a year earlier. Shares dipped 2% to USD104.69 in morning trading on Friday.

Chevron's cash flow from operations, at USD4.2 billion, was more than USD1 billion below Wall Street estimates, according to Refinitiv IBES data. Its expenses for debt costs, employee pensions and benefits more than doubled to USD978 million. Weaker-than-expected cash generation "left a slightly higher net debt position than expected," of $38.3 billion, said analyst Biraj Borkhataria at RBC Europe Limited.

While Chevron boosted its dividend this week, "investors will need to be patient" for share repurchases, Borkhataria said. The 3.9% dividend increase was a surprise as "most investors expected a more modest 2% dividend hike later in the year," said Manav Gupta, analyst at Credit Suisse.

The weaker earnings contrasted with those at BP, Royal Dutch Shell and Total, which reported results that topped year-ago levels. BP nearly tripled earnings while Total posted a 69% gain. Chevron's refining eked out a USD5 million profit, down from USD1.1 billion a year ago, as the pandemic continued to mute demand for jet fuel, diesel and gasoline, and the winter storm hurt U.S. operations.

Earnings from oil and gas production fell 20% despite price gains as non-U.S. operations suffered from declining volumes, foreign currency impacts and the absence of an asset sales gain. The unit benefited from higher oil volumes from the acquisition of Noble Energy in October. Chevron said capital spending for the first quarter was USD2.5 billion, down from USD4.4 billion in the same period last year.

The company will restrain spending this year, including in U.S. shale. "The stock markets are not sending a signal to us or our sector to increase capital," Breber said. Chevron is looking toward a "sustained global recovery" before increasing activity, Breber said, adding that OPEC and allies are easing their oil production curbs.

The United States accounts for more than half of Chevron's capital spending, up from one-quarter five years ago, with last year's Noble purchase increasing the company's U.S. focus, said Peter McNally, analyst at Third Bridge Group.

As per MRC, Chevron Phillips Chemical (CP Chem), one of the world's largest petrochemical companies, halted production at cracking unit 1592 in Cedar Bayou, TX, USA on April 26 for routine maintenance. It is expected that repairs at this enterprise with a capacity of 850 thousand tons of ethylene per year will continue until May 3 of this year. Chemical emissions to the atmosphere are expected within about seven days.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

Chevron Corporation is one of the world's leading full-cycle oil companies "from well to end user" and one of the largest companies in the world by market capitalization. Chevron Phillips Chemicals Company LP is a 50/50 joint venture between ConocoPhillips and Chevron Corporation. Chevron Phillips combines Chevron and ConocoPhillips' technologies and chemicals. Annual sales are USD7 billion.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry, Chevron, Chevron Phillips.
Category:General News
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