Chevron tops Q3 earnings estimates with record production after Hess deal
Adjusted earnings for the three-month period ended Sep 30 were US$3.6 billion or US$1.85 per share
[HOUSTON] Chevron beat analyst estimates on Friday (Oct 31) as record oil and gas production, boosted by its US$55 billion acquisition of Hess, and stronger refining margins lifted the No 2 US oil producer’s results for the third quarter.
Adjusted earnings for the three-month period ended Sep 30 were US$3.6 billion or US$1.85 per share, which handily beat the consensus estimate from analysts of US$1.68 per share as compiled by LSEG.
Cash flow from operations excluding working capital grew nearly 20 per cent year-over-year to US$9.9 billion, driven in part by production growth in areas including the Permian Basin and the US Gulf of Mexico, Chevron chief financial officer Eimear Bonner said in an interview.
The company said in an investor presentation that it expects strong cash generation to continue, even with lower oil prices, because of increased capital efficiency and growth in high-margin assets. Chevron completed the acquisition of Hess in July, which gave the company access to a prolific oilfield in Guyana operated by larger rival Exxon Mobil. The deal puts Chevron in a better position to weather oil price volatility with a source of profitable production, investors have said.
Biraj Borkhataria, an analyst with RBC Capital Markets, said in a research note that Chevron’s earnings report was strong, with every business and region beating market expectations.
“We expect the market to take this positively, as it highlights continued momentum in its base business, as well as growth coming through from the newly acquired barrels, all of which are contributing to cash generation,” he said.
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Chevron will host an investor day on Nov 12 to provide updated financial guidance to shareholders following the Hess deal. The new combined company produced 4.1 million barrels of oil equivalent per day (boepd) in the third quarter, a record high and up from Chevron’s standalone production of 3.4 million boepd in the same quarter last year.
The results were also buoyed by lower costs, as Chevron is on pace to reach US$2 billion to US$3 billion in cost reductions next year, Bonner said.
“Those are the catalysts that are coming together to give us this high confidence in free cash flow growth with lower execution risks, given that all these major milestones are behind us,” she said.
Upstream earnings totalled US$3.3 billion, a 28 per cent decline from the same period last year due to lower oil prices. Chevron’s profit from the downstream business jumped 91 per cent over the same time frame to US$1.1 billion, driven by higher refining margins and lower operating expenses in the US.
Chevron paid US$3.4 billion in dividends and bought back US$2.6 billion worth of shares during the quarter. The company said capital expenditure, which totalled US$4.4 billion in the third quarter, rose from the same period last year because of spending on legacy Hess assets. Benchmark Brent crude prices averaged US$68.17 over the third quarter, down about 13 per cent from the same period last year and up 2 per cent from the second quarter. The Opec+ group of oil producers increased its output throughout the year, raising fears about oversupply and hampering crude prices.
Average US natural gas prices during the quarter rose about 38 per cent compared with the year-ago quarter. REUTERS
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