Chevron Earnings Hurdle Low Bar

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Chevron Corp. (NYSE: CVX) reported third-quarter 2016 results before markets opened Friday. The oil and gas supermajor posted a diluted earnings per share (EPS) of $0.68 on total revenues of $30.14 billion. Operating revenues totaled $29 billion in the quarter, down from $33 billion in the year-ago quarter. In the same period a year ago, the company reported earnings per share of $1.09 on revenues of $34.14 billion. Third-quarter results also compare to the consensus estimates for EPS of $0.37 and $29.05 billion in revenues.

Chevron also raised its quarterly dividend by $0.01 to $1.08, payable in December.

Capital spending totaled $5.17 billion in the quarter, down from $7.97 billion in the same period last year. Capex for the first nine months of the year totaled $17.2 billion, down from $25.3 billion last year.

U.S. upstream operations posted a loss of $212 million in the third quarter, significantly better than the $603 million loss posted in the third quarter of 2015. Chevron attributed the improvement to lower operating and depreciation expenses, as well as lower tax items, partially offset by lower crude oil realizations.

The company’s average U.S. sales price per barrel of crude oil and natural gas liquids was $37.00 in the quarter, down from $42.00, in the year-ago quarter. The realized average natural gas price dropped from $1.96 per thousand cubic feet to $1.89 year-over-year.

CEO John Watson said:

Our operational performance in the third quarter was strong. Our refineries continued to run well and Tengizchevroil completed the largest turnaround in its history ahead of schedule and under budget. We have had steady LNG production and cargo shipments from Gorgon Train 1, and we recently started LNG production from Gorgon Train 2. In light of these milestones, we expect December production between 2.65-2.70 million barrels per day in oil-equivalent. We have made progress toward our goals of lowering the cash breakeven in our upstream business and getting cash balanced. Capital spending and operating and administrative expenses have been reduced by over $10 billion from the first nine months of 2015 as a result of a series of deliberate actions we have taken.

Net domestic oil-equivalent production fell by 32,000 barrels per day to 698,000. Net U.S. liquids production was up about 2.8% at 519,000 barrels a day, and natural gas production slipped about 20% from 1.35 billion cubic feet per day to 1.08 billion.

The earnings announcement did not include guidance, but consensus estimates for the fourth quarter call for EPS of $0.69 on revenues of $41.28 billion. For the full year, EPS and revenues are estimated at $1.19 and $120.17 billion, respectively.

Chevron’s shares traded up about 2.7% early Friday, at $102.62 in a 52-week range of $75.33 to $107.58. The consensus 12-month price target was $111.46 before this latest report.