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Top view of Chevron profits, but oil company announces new spending cuts
Derek Brower in London
Chevron, the second-largest US oil majors, reported first-quarter earnings of $ 3.6 billion on Friday, up from $ 2.6 billion a year earlier, beating analyst expectations and breaking a trend of deep losses in one sector. affected by the collapse of world oil demand. and crude oil prices in the face of the coronavirus pandemic.
But the company will also cut capital spending to just $ 14 billion this year, a further 12.5 percent reduction that follows sharp cuts to the capital spending program announced last month.
Total revenue was down to $ 31.5 billion for the quarter, a drop of about 11 percent, but still marginally above analyst expectations. First-quarter diluted earnings per share of $ 1.93 were nearly three times higher than analyst consensus forecast and well above $ 1.39 per share a year earlier. Cash flow from operations of $ 4.7 billion also exceeded expectations.
Chevron CEO Mike Wirth said the deepest capital cuts were consistent with the company’s “long-standing priorities,” including protecting its dividends. Chevron maintained its dividend for the quarter at $ 1.29 per share, after an 8.4 percent increase in payment during the previous quarter.
Royal Dutch Shell cut its dividend on Thursday in a move widely seen as a watershed moment for the oil industry and its big companies.
Mike Wirth, chief executive officer of Chevron, said the first quarter performance was driven by strong margins in its downstream business, which includes refineries, and an increase in Permian production. Asset sales in the Philippines and favorable tax items totaling $ 440 million increased first quarter earnings, as well as a $ 514 million gain from foreign currency effects.
While upward international earnings increased last year thanks to the effects of the foreign currency, earnings in the upstream US business. USA They fell from around $ 750 million in the first quarter of 2019 to $ 241 million this year, mainly due to falling oil and gas prices.
Chevron’s average sales price for crude oil in the first quarter was $ 37 per barrel compared to $ 48 a year ago. Oil prices have fallen 70 percent since early January, although the sharp decline in April will only be visible in the producers’ second-quarter results.
On Thursday, the company warned that financial results in future periods “are expected to depress as long as current market conditions persist.”
In late March, Chevron said it would cut capital spending by $ 4 billion, or 20 percent compared to last year, to $ 16 billion, with half the cuts to fall on the Permian shale. The cuts announced on Friday will bring total capital spending to just $ 14 billion in 2020.
