Chevron books larger profit but opts for fresh capex cuts

Oil major Chevron booked a larger profit in the first quarter of 2020 compared to the same period last year on the back of asset sales, favourable tax items, and forex gains, but decided to further cut its apex guidance for the year. Chevron also set a new quarterly production record.

Chevron last Friday reported earnings of $3.6 billion for the first quarter of 2020, compared with earnings of $2.6 billion in the first quarter of 2019.

Included in the current quarter was a gain of $240 million associated with the sale of upstream assets in the Philippines and favourable tax items totalling $440 million attributable to international upstream.

Foreign currency effects increased earnings in the first quarter of 2020 by $514 million.

Sales and other operating revenues in the first quarter of 2020 were $30 billion, compared to $34 billion in the year-ago period.

“First-quarter earnings were up from a year ago,” said Michael K. Wirth, Chevron’s chairman of the board and chief executive officer, “driven by downstream margins and increased Permian production. However, commodity prices fell significantly in March and the weakness continued into the second quarter, primarily due to reduced demand resulting from the COVID-19 pandemic.”

Wirth also added that the company’s financial results in future periods are expected to be depressed as long as current market conditions persist.

Chevron is further reducing its 2020 capital expenditure guidance by up to $2 billion to $14 billion.

The company has already reduced its 2020 capital spending plan by $4 billion.

In addition, the company estimates that 2020 operating costs will decrease by $1 billion. This follows the previously announced suspension of share repurchases and the completion of additional asset sales.

“Together these actions are consistent with our longstanding financial priorities: to protect the dividend; to prioritize capital that drives long-term value, and to maintain a strong balance sheet,“, said Wirth.

Chevron’s worldwide net oil-equivalent production was 3.24 million barrels per day in the first quarter of 2020, an increase of over 6 per cent from a year ago, and a new quarterly record.