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Chevron follows Exxon with earnings miss as oil prices stagnate
[CHICAGO] Chevron fell short of Wall Street expectations, following similar results from US rival ExxonMobil, as the explorer failed to take full advantage of spending cuts and a modest rise in crude markets.
Chevron's 77 US cent per-share result for the quarter was 10 US cents lower than the average of 22 analysts's estimates compiled by Bloomberg.
The world's third-largest crude driller by market value was an outlier among major international oil producers who almost uniformly posted outsized performances this week that confounded analysts. The shares fell in early New York trading.
Chief executive officer John Watson, in his eighth year at the helm, has resorted to job cuts, project cancellations and billions of dollars in asset sales to cope with an industry downturn that erased US$50 billion from Chevron's market capitalisation.
While the company reported higher-than-expected output from wells in the quarter, turning its upstream unit from a year-ago loss to profitability, returns on refining crude into fuels shrank.
'We're delivering higher production with lower capital and operating expenditures," chief executive officer John Watson said in the statement.
Oil at US$50 a barrel is "the absolute point of pain" for Chevron, said Paul Sankey, a Wolfe Research LLC analyst, in a July 17 note to clients.
Below US$50, Chevron's "balance sheet deteriorates".
Chevron swung to a second-quarter profit of US$1.45 billion, or 77 US cents a share, compared to a loss of US$1.47 billion, or 78 US cents, a year earlier, the company said Friday in a statement.
The jump in global crude prices earlier this year that spurred optimism that the worst was over has given way to renewed pessimism that world markets will be awash in excess oil for years to come.
A key driver of the gloom has been ample production from US shale producers who have learned to eke out profits even at lower prices.
Brent crude, the international benchmark, averaged US$50.79 a barrel during the period, an 8 per cent increase from a year earlier, according to data compiled by Bloomberg.
But since the end of the second quarter, prices have dipped as low as US$46.11, prompting some explorers to slash drilling budgets this week.