Chevron’s Profits Dampened by Refining and Natural Gas Woes
Despite beating earnings expectations, Chevron witnessed a 16% dip in net income, dropping from .57 billion in the first quarter of 2022 to .5 billion in the same period this year.
Earnings Results
- Earnings per share: .93 adjusted, exceeding the estimated .87
- Revenue: .72 billion, falling short of the expected .66 billion
Reasons Behind the Decline
Chevron’s profit decline stemmed primarily from diminished refining margins and lower natural gas prices negatively impacting international production. These factors hindered profits despite a significant increase in oil prices and gasoline futures.
Refinery and Natural Gas Turmoil
Natural gas prices have plummeted by 37% this year, leading to a downfall in Chevron’s international earnings. Sales margins for gasoline have also dwindled year-over-year, further contributing to the company’s profits loss.
As a result, Chevron’s US refining business saw its earnings plunge by more than half, while international refining profits plummeted by nearly 60%. Natural gas production from international operations also faced a decline of 39,000 barrels per day, leading to reduced earnings for the sector.
Production and Acquisitions
However, Chevron’s US oil and gas business experienced a 16% increase in earnings due to higher sales volume and a significant increase in production from the Permian Basin and Denver-Julesburg basins.
Despite the challenges in the international market, total worldwide production still managed to increase by 12%, setting a new record for the first quarter. Chevron maintains confidence in closing its acquisition of Hess Corp. in 2024, pending the completion of regulatory processes and approval from federal agencies.
Capital Expenditures and Dividends
Capital expenditures surged to .1 billion, compared to billion in the previous year, primarily directed towards oil and gas production and legacy assets acquired from PDC Energy.
Dividend payments remained at billion, while share repurchases reached nearly billion. Chevron’s return on capital of 12.4% was lower than the 14.6% recorded in the first quarter of 2022.
Conclusion
Chevron’s financial performance reflects the ongoing challenges faced within the energy sector, particularly those related to refining and natural gas operations. Despite exceeding earnings expectations, the company’s overall profits have been impacted by market headwinds.
