Chevron profit drops on weaker refining margins, storm hit

REUTERS: Chevron Corp’s (CVX.N) first-quarter profit fell 29 percent compared with 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.

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,” said Chevron Chief Executive Officer Michael Wirth.
A U.S. winter storm that halted some output cost US $ 300 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 US $ 1.72 billion, or 90 cents per share, compared with US $ 2.45 billion, or US $ 1.31 per share, a year earlier. Year-ago results included about US $ 680 million in asset sales and favourable tax items.

Net profit was US $ 1.4 billion, or 72 cents a share, down from US $ 3.6 billion, or US $ 1.93 cents a share, a year earlier.

Chevron’s cash flow from operations, at US $ 4.2 billion, was more than US $ 1 billion below Wall Street forecasts, according to Refinitiv IBES data. Its expenses for debt costs, employee pension and benefits more than doubled to US $ 978 million.

Its weaker earnings contrasted those at BP, Royal Dutch Shell and Total, which posted results that topped year-ago levels. BP nearly tripled earnings while Total posted a 69 percent gain. 

Chevron’s refining eked out a US $ 5 million profit, down from US $ 1.1 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 percent 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 US $ 2.5 billion, down from US $ 4.4 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.