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Chevron Expects Drop In 1QFY14 Profits

Chevron Expects Drop In 1QFY14 Profits
By: Micheal Kaufman
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Chevron Corporation (CVX) provided an interim update for the first quarter of its fiscal 2014 (1QFY14; ended March 31, 2014) after markets closed yesterday. The second-largest oil company in the US based on market value – trailing Exxon Mobil Corporation (XOM) – expects its first quarter earnings to be lower than its earnings in 4QFY13, primarily due to unfavorable foreign currency exchange rates and environmental charges related to its mining unit. In after-hours trading yesterday, the stock price declined 0.54% to $118.46.

The San Ramon, California-based company expects to record negative foreign currency charges of $100 million for the quarter. During 4QFY13, Chevron reported a positive foreign currency impact of $200 million. It also intends to record $400-500 million as asset impairment costs, most of which would be related to its mining operations.

Chevron also provided an update on its production from its upstream and downstream segments for the first two months of its first quarter, and compared it to the previous four quarters’ performance.

Chevron Corporation's Upstream Segment Performance

The company reported that its production of oil and natural gas has dropped due to downtime caused by unfavorable weather across multiple regions where the oil supermajor currently operates, such as Kazakhstan, Canada, and the US.

During the first two months of the quarter, average oil and natural gas production in the US fell 4.2% from the same period of last year to 637,000 barrels of oil equivalent per day (BOE/D). Last year, the company’s production in the US declined for three consecutive quarters.

Realized oil price in the US declined 3.4% on a yearly basis to $91.26 per barrel (bbl), whereas realized price for natural gas improved by 51.1% during the same period to $4.7 per thousand cubic feet (MCF).

Chevron’s international oil and natural gas production declined 2% YoY to 1.9 million BOE/D during the first two months of the current quarter. Realized international oil prices also dropped by 3.9% YoY to $98.37/bbl, while realized international natural gas prices fell 2% to $5.95/MCF.

Chevron Corporation's Downstream Segment Performance

The company reported a decline in refinery input due to harsh weather and increased maintenance activities at multiple refineries. The US refinery input declined 0.9% quarter-over-quarter (QoQ) to 863,000 barrels per day (BPD), while international refinery input fell 9.6% to 794,000 BPD. Sales of branded motor gas by the company in the country also declined 3.3% QoQ during the same period.

Out of 29 analysts providing coverage on the stock, 16 have rated Chevron as a Buy while 12 have given the stock a Hold rating. The average of the 12-month target price provided by these analysts is $128, which at yesterday’s closing price of $119.1 translates into an upside potential of 7.5%.

The oil company is scheduled it to report its first quarter results before the opening bell on May 2, and hold its annual shareholder conference on May 28. Last quarter, Chevron missed revenue and earnings estimates. For the current quarter, analysts estimate the company will report revenues of $55.1 billion and adjusted EPS of $2.69.

Bidness Etc is bullish on Chevron stock.

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