Photo: Chevron headquarters; Source: Chevron

Chevron profit shrinks due to effects of pandemic, storm Uri

U.S. oil major Chevron booked a smaller profit in the first quarter of 2021 compared to the same period last year because of ongoing downstream margin and volume effects resulting from the pandemic and the impacts of winter storm Uri.

Chevron on Friday reported earnings of $1.4 billion for the first quarter of 2021, compared with earnings of $3.6 billion in the first quarter of 2020.

Included in the current quarter were pension settlement costs and legal reserves totalling $351 million. Foreign currency effects also decreased earnings by $2 million.

Sales and other operating revenues in the first quarter of 2021 were $31 billion, compared to $30 billion in the year-ago period.

Mike Wirth, Chevron’s chairman and chief executive officer, said: “Earnings strengthened primarily due to higher oil prices as the economy recovers. Results were down from a year ago due in part to ongoing downstream margin and volume effects resulting from the pandemic and the impacts of winter storm Uri.

We maintained capital discipline with capital spending down 43 per cent from last year. We realized cost efficiencies from last year’s restructuring and the integration of Noble Energy.

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We took action to advance a lower-carbon future by announcing plans with partners to develop carbon-negative bioenergy and commercially viable, large-scale businesses in hydrogen”.

During the quarter, Chevron announced an agreement to acquire all the publicly held common units representing limited partner interests in Noble Midstream Partners not already owned by Chevron and its affiliates in exchange for shares of common stock in Chevron. This transaction is expected to close in the second quarter of 2021.

Chevron completed the acquisition of Noble Midstream Partners’ parent company Noble Energy in October last year.

The company’s capital and exploratory expenditures in the first three months of 2021 were $2.5 billion, compared with $4.4 billion in 2020. The amounts included $678 million in 2021 and $1.2 billion in 2020 for the company’s share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 84 per cent of the company-wide total in 2021.

Also, free cash flow excluding working capital was $3.4 billion in the first quarter of 2021, and the board approved a 4 per cent dividend increase earlier this week.

Worth reminding, its compatriot supermajor ExxonMobil announced its financial results for the first quarter of 2021 on the same day. ExxonMobil was able to book a $2.7 billion quarterly profit due to the benefits of higher commodity prices and structural cost reductions.