CHEVRON reported second-quarter earnings on Friday (Aug 2) that missed Wall Street estimates due to industry-wide pressure from lower refining margins and natural gas prices, sending its shares down 1.5 per cent in premarket trading.
The company earlier had warned oil output this quarter would slip and refining would suffer from turnarounds at two refineries in California. Refining margins have been weak globally, hurting other oil majors like BP and Shell .
Chevron said it would relocate the company’s headquarters from San Ramon, California, where it was born 145 years ago as Pacific Coast Oil to Houston. The company has been bitterly contesting state regulations on its oil producing and refining operations in the state.
Chevron reported earnings of US$4.4 billion, or US$2.43 per share, in the quarter, compared with US$6 billion a year before.
It reported adjusted earnings of US$4.7 billion, or US$2.55 per share, compared to US$2.93 expected by Wall Street analysts, according to LSEG data.
“Results were disappointing,” said Peter McNally, global sector lead for energy at Third Bridge.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The shortfall can be attributed to the international upstream segment, which missed expectations by approximately 11 per cent, he said.
Earnings from pumping oil and gas were down 9.4 per cent from a year earlier. Profit from producing petrol and chemicals was also down about 60 per cent to US$597 million.
“Despite recent operational downtime and softer margins, we remain poised to deliver significant long-term earnings and cash flow growth,” CEO Mike Wirth said.
Refining margins
Oil refiners made less money selling petrol in the second quarter after two years of stellar profits and after ramping up production for demand that never materialised.
Lower refining margins drove Shell’s profits down 19 per cent from the previous quarter to US$6.3 billion. Refining margins also limited BP forecast-beating US$2.8 billion profit and contributed to TotalEnergies’s 6 per cent earnings drop.
Deal delay
The downbeat results come as its proposed US$53 billion acquisition of oil producer Hess has been stalled.
On Wednesday, the company said an arbitration panel that will evaluate a challenge to the deal from ExxonMobil likely will not have a decision until the second half of next year.
Exxon expects a decision on the dispute by September 2025, chief financial officer Kathryn Mikells told Reuters.
“I can confirm (the hearing) at that end of May 2025. And there is an expectation of a ruling by September of 2025”, she said.
The delay prompted speculation over potential talks between Exxon and Chevron to reach a settlement sooner.
“Given the much later anticipated arbitration hearing timeline, I would think there is an incentive for Hess and Chevron to try to provide some sort of sweetener to Exxon to make this go away,” said Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group.
Exxon’s CFO declined to comment on whether the companies were engaged in side negotiations.
Chevron shares have underperformed both Exxon and the S&P 500 index this year as it struggles to conclude the deal, which would give it a stake in a Guyana joint venture that has found more than 30 significant oil discoveries.
Chevron is counting on this deal to establish a foothold in Guyana’s lucrative oil reserves and help mitigate risks associated with its performance-challenged oil and gas operations in Australia and Kazakhstan.
California
California’s oil output a century ago amounted to it being the fourth-largest crude producer in the US But oil majors have been phasing out of the state amid stricter climate regulations and depleting oil fields.
Chevron expects all corporate functions to migrate to Houston over the next five years. Positions in support its California operations, which includes oil fields and two refineries, will remain in San Ramon.
Chevron CEO Wirth and vice-chairman Mark Nelson will move to Houston before the end of 2024, the company said.
Chevron currently has roughly 7,000 employees in the Houston area and about 2,000 employees in San Ramon. REUTERS
