Chevron Corp. reported first-quarter earnings of $2.6 billion, down from $4.5 billion in first-quarter 2014. Sales and other operating revenues in first quarter totaled $32 billion, compared with $51 billion a year earlier.
“First-quarter earnings declined from a year ago due to sharply lower oil prices, which reduced revenue and earnings in our upstream business,” said John Watson, Chevron chairman and chief executive officer. “Downstream operations were strong, benefitting from lower feedstock costs and improved refinery reliability.”
Capital and exploratory expenditures in the year’s first 3 months totaled $8.6 billion, compared with $9.4 billion in the corresponding 2014 period, including $730 million in 2015 and $612 million in 2014 for the company’s share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 95% of the companywide total during the first 3 months of the year.
Chevron at the beginning of the year reported a $35-billion capital and exploratory investment program for 2015, with total upstream spending of $31.6 billion. (OGJ Online, Jan. 30, 2015).
“We’re responding to the current price environment by capturing cost reductions, pacing new project approvals, and further streamlining our portfolio as planned,” Watson said. “We’re taking a number of deliberate actions to lower our cost structure, and I expect these efforts to increasingly show through in our financial results as the year progresses.”
Upstream earnings down
Chevron’s worldwide net production totaled 2.68 boe/d during the quarter, up from 2.59 million boe/d in first-quarter 2014. The increase of more than 3% came from project ramp-ups in the US, Bangladesh, and Argentina, along with production entitlement effects in several locations. Normal field declines and the effect of asset sales partially offset those effects.
“We remain on track to deliver significant cash flow and production growth by 2017,” Watson stated.
However, global upstream earnings totaled $1.56 billion, down year-over-year from $4.31 billion.
US upstream operations incurred a loss of $460 million during the quarter, down from earnings of $912 million a year earlier, largely due to sharply lower crude oil prices. Higher depreciation expenses, in part due to impairments, and lower natural gas prices, were largely offset by higher crude oil production and lower operating expenses.
International upstream earnings of $2.02 billion were down $1.38 billion from first-quarter 2014. Sharply lower crude oil realizations were partially offset by lower tax items, including a reduction in statutory tax rates in the UK, higher gains on asset sales and lower operating expenses.
Downstream earnings up
Global downstream earnings totaled $1.42 billion, up year-over-year from $710 million.
US downstream operations earned $706 million in the first quarter, up from $422 million a year earlier, due to higher margins on refined product sales, partially offset by the absence of a 2014 gain on sale of an interest in a pipeline affiliate and lower earnings from the 50%-owned Chevron Phillips Chemical Co. LLC.
Refinery crude oil input of 918,000 b/d during the first quarter was up 46,000 b/d year-over-year. The increase was primarily due to lower 2015 downtime at refineries in Richmond and El Segundo, Calif.
International downstream operations earned $717 million, up from $288 million a year earlier, due to higher margins on refined product sales, partially offset by an unfavorable change in effects on derivative instruments.
Refinery crude oil input of 782,000 b/d during the quarter was up 8,000 b/d from the year-ago period. Increased crude runs due to the absence of 2014 planned downtime at the Star Petroleum Refining Co. in Thailand were largely offset by the decrease due to the October 2014 conversion of an affiliate refinery into an import terminal in Kurnell, Australia.
“In the downstream, we continued to streamline our asset portfolio with the sale of our interest in Caltex Australia Ltd.,” Watson noted. “This sale is aligned with our previously announced asset sales commitment.” Cash proceeds of $3.6 billion were received upon settlement on Apr. 2, and a gain on sale of $1.6 billion will be reflected in second-quarter results (OGJ Online, Mar. 27, 2015)."