Chevron lifts downstream results as margins rise
10/30/2015 12:00:00 AM
Downstream earnings in the third quarter improved in both the US and internationally for Chevron, the company announced on Friday. Overall profit from refining oil into fuels jumped 59% to $2.2 billion.By segment, Chevron reported that its US downstream operations earned $1.2 billion in the quarter, compared with earnings of $809 million a year earlier.
"The increase was due to higher margins on refined product sales and lower tax items, partially offset by the absence of a 2014 asset sale gain," the company said in its earnings rease.
US refinery crude oil input for Chevron rose 2% in the quarter to 942,000 bpd.
Meanwhile, US refined product sales of 1.25 million bpd were up 2% from a year earlier, primarily reflecting higher jet fuel sales. Branded gasoline sales of 536,000 bpd were also up 2%.
Outside of the US, Chevron's international downstream operations earned $962 million in the quarter, up from $578 million a year earlier.
"The increase was primarily due to higher margins on refined product sales and a favorable change in effects on derivative instruments," the company said. "Foreign currency effects increased earnings by $141 million in third quarter 2015, compared with an increase of $21 million a year earlier.
International refinery crude oil input of 777,000 bpd was down by 61,000 bpd from a year earlier, though that was primarily due to Chevron's divestment of its Caltex Australia refining operations.
Total international refined product sales of 1.5 million bpd in the third quarter were essentially unchanged from 2014 results. Excluding the effects of the Caltex Australia divestment, refined product sales were higher by 133,000 bpd, primarily reflecting higher sales of jet fuel and gas oil.
The strong downstream performance for Chevron could not, however, offset weaker upstream results due to the impact of weaker crude pricing. Net income for Chevron fell to $2.04 billion from $5.59 billion a year earlier.
Even though that profit surpassed analyst expectations, Chevron said the reduced numbers were prompting it to eliminate an additional 6,000 to 7,000 jobs, or about 10% of its workforce. The job cuts are the deepest at Chevron since 2001. The company is also looking to sell up to $10 billion more in assets.
“Third quarter earnings were down substantially from a year ago,” said Chevron CEO John Watson. “While downstream earnings remained strong, lower overall earnings reflected weaker market prices for both crude oil and natural gas, which depressed upstream profitability.
"We are focused on improving results by changing outcomes within our control," he continued. "Operating and administrative expenses are 7% lower than last year, and we expect further reductions in the quarters ahead.
“We expect capital and exploratory expenditures for 2016 to be $25-28 billion, roughly 25% lower than this year’s budget. We expect further reductions in spending for 2017 and 2018, to the $20 to $24 billion range, depending on business conditions at the time. With the lower investment, we anticipate reducing our employee workforce by 6–7,000. We continue to make good progress on our asset sales program. In the last two years we’ve generated $11 billion in proceeds. We expect $5-10 billion in additional proceeds by the end of 2017.”
Comments