Chevron Profit Beats Estimates on War-Driven Surge in Oil Prices

m{venvjm)4m8jmzq(ad)jsb6_media_dl_1.png Bloomberg

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(Bloomberg) — Chevron Corp. exceeded profit expectations as higher oil and natural gas prices, as well as supplies from the acquisition of Hess Corp., outweighed production outages from the Iran war. 

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Adjusted first-quarter net income of $1.41 a share was 51 cents higher than the average estimate from analysts in a Bloomberg survey. Surging prices for crude and gas, combined with growth from Chevron’s new stake in a giant Guyanese field, helped cushion the blow from a 5% sequential drop in overall output. 

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Chevron already had warned that significant accounting losses on derivatives tied to cargoes that had yet to reach their destinations. Notoriously difficult to model, that guidance prompted some analysts to slash estimates, a factor that may have played into the magnitude of Friday’s beat. 

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Chevron’s outsized earnings owed much to swelling prices for real-world oil from places such as Kazakhstan, as well as fat margins from processing the company’s own crude through refineries, Chief Financial Officer Eimear Bonner said in an interview.

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“Bottom line, execution exceeded expectations,” she said.

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BP Plc and TotalEnergies SE also exceeded forecasts when they reported earlier this week, boosted by strong trading results. 

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Chevron bought back $2.5 billion of stock during the quarter, 16% less than the previous period and at an annual rate at the bottom of its annual $10 billion-to-$20 billion guidance range. Some analysts had speculated the company might increase repurchases. 

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The company is loathe to boost buybacks based on the recent jump in energy prices and would need to see a more sustained rally to change course, Bonner said.

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“What we’d need to see is something more durable in the fundamental outlook, more of a structural price update for us to be making any adjustments,” the CFO said. “For now, we’re happy with where we are.”

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The $60 billion acquisition of Hess, combined with growing production from the US Gulf of Mexico and the Permian Basin, ensured that Chevron’s production was higher than a year ago, more than offsetting outages in Israel, the partitioned zone between Saudi Arabia and Kuwait, and Kazakhstan. 

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But the company was not immune from the impacts of the war. Its international refining division lost $1 billion due to “lower margins on refined product sales,” unfavorable accounting effects and higher transportation costs. 

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