Chevron Surprises With Profit Despite Dimming Outlook

Chevron Corp. posted a surprise profit as the oil supermajor slashed capital spending to cope with the pandemic-driven collapse in crude demand.

The California oil titan posted adjusted per-share earnings of 11 cents for the third quarter, outperforming the average 27-cent loss expected by analysts in a Bloomberg survey. Production from the company’s crude and natural gas wells tumbled to the lowest in more than two years, partly because of intentional decisions to curtail operations that couldn’t turn profits as prices cratered.

Times are tough for the industry and Chevron is willing to let production drop while successive waves of Covid-19 suppress crude demand and weigh on prices. U.S. cases of the virus rose to a new record on Friday while Europe’s largest economies prepared for fresh lockdowns.

“We’re not trying to sustain short-term production,” Chief Financial Officer Pierre Breber told analysts and investors during a conference call. “We’re in an economy that’s impacted by its pandemic and demand for our products is below normal levels and pre-pandemic levels, and therefore we have oversupplied markets.”

Chevron Surprises With Profit Despite Dimming Outlook

Chevron shares were little changed at $68.67 at 1:58 p.m. in New York.

Chevron is in the process of cutting about 6,000 jobs and scaling back capital spending even as it works to fold Noble Energy Inc.’s assets and staff into the company after the $4.2 billion takeover earlier this month.

What Bloomberg Intelligence Says

Chevron outspent cash flow in yet another quarter, but appears to have room on the balance sheet to sustain the dividend for several more quarters, even as oil prices fall again. The addition of Noble should help 4Q, with stable cash flows from Israel natural gas.

-- Fernando Valle, energy analyst

Earnings at Chevron’s upstream division fell 91% to $235 million from a year earlier. Profit from the so-called downstream unit, which includes oil refining, declined by 65%. Severance costs alone are expected to drain half a billion dollars from the company’s coffers during the current quarter.

“We remain focused on what we can control – safe operations, capital discipline and cost management,” Chief Executive Officer Mike Wirth said in a statement.

Top Performer

European rivals also beat forecasts amid the worst crude downturn in a generation. BP Plc surprised by avoiding a loss, while Royal Dutch Shell Plc and Total SE both exceeded expectations. Meanwhile, U.S. rival Exxon Mobil Corp. posted a third consecutive loss, extending the worst losing streak in the company’s modern history.

Chevron is the best performer among its Big Oil rivals this year and briefly surpassed long-time rival Exxon in market value to become America’s largest oil company. But Chevron is still down more than 40% this year, which would be its worst annual performance in Bloomberg data going back 40 years.

©2020 Bloomberg L.P.

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