Chevron beat earnings expectations in the first quarter, reporting adjusted earnings per share of $2.93 compared to the expected $2.87. However, its net income fell 16% from the year-ago period to $5.5 billion, or $2.97 per share. The company attributed this decline to lower sales margins at its refineries and lower natural gas prices affecting its international gas business. Revenue also fell from $50.79 billion a year ago to $48.72 billion, below analysts’ expectations. Chevron’s shares dropped about 1% in premarket trading on the news.
Oil prices have been on the rise this year, with a more than 16% increase, and gasoline futures up 31%. However, this did little to lift profits for Chevron, as lower natural gas prices due to a supply glut and declining retail and distribution margins impacted the company’s earnings. The U.S. oil and gas business saw a 16% increase in earnings to about $2 billion, driven by higher sales volume. Chevron’s refining business in the U.S. and internationally saw significant declines in profits, falling by more than half in the U.S. and nearly 60% internationally.
Chevron reported strong production gains in the U.S., producing 1.57 million barrels of oil and gas daily in the first quarter, a 35% increase from a year ago. The company attributed this to strong output in the Permian and Denver-Julesburg basins. International oil and gas earnings fell 6% to $3.2 billion, with production decreasing by 39,000 barrels per day to 1.77 million barrels, primarily due to maintenance in Nigeria and field declines. Despite this, total worldwide production increased by 12% to 3.35 million barrels per day, its highest first-quarter output on record.
Chevron remains confident in its pending acquisition of Hess Corp., expecting it to close in 2024 despite a challenge from Exxon Mobil in arbitration court over rights in a joint operating agreement for oil assets in Guyana. The company anticipates the shareholder vote and Federal Trade Commission requests for information on the deal to be completed in the second quarter. Capital expenditures rose to $4.1 billion in the first quarter, a 37% increase from the year-ago period, with higher spending on oil and gas production and old assets from the acquisition of PDC Energy in August.
Chevron paid out $3 billion in dividends and repurchased nearly $3 billion of its shares in the quarter, though its return on capital of 12.4% was lower than the 14.6% in the first quarter last year. The company continues to focus on improving its financial performance and navigating challenges in the energy industry. Despite facing headwinds in refining and the international gas business, Chevron remains optimistic about its future growth and acquisition plans.
