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FINANCIALS

Chevron Corporation (CVX) Reports $725 Million Loss in 1QFY16

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Chevron Corporation reported net loss of $725 million in 1Q on the back of lower crude pricesCAPEXDividend

Chevron Corporation (NYSE:CVX) in its 1QFY16 earnings reported a net loss of $725 million, or loss of $0.39 per share. Its earnings declined from $2.6 billion in the same period a year ago. Although crude oil prices have recovered in recent weeks despite the failure of agreement on production freeze, the prices remained suppressed in 1Q this year which contributed to the company’s substantial loss.

Chevron’s CEO Mr. John Watson stated that “Our upstream business was impacted by a more than 35 percent decline in crude oil prices. Our downstream operations continued to perform well, although overall industry conditions and margins this quarter were weaker than a year ago.”

Chevron’s financial performance is summarized in the table below, which highlights that the upstream segment continued to hit hard on back of lower oil prices.

Earnings by business segment (In Millions of Dollars)

1QFY16

1QFY15

Upstream——————————————————————-

(1,459)

1,560

Downstream—————————————————————

735

1,423

All Other——————————————————————–

(1)

(416)

Total————————————————————————-

(725)

2,567

 

Chevron’s average sales price of crude oil amounted to $26 a barrel, as compared to $43 in the same period a year ago. Also, average sales price of natural gas of $1.32 per thousand cubic feet was much lower than $2.27 in 1Q last year.

Mr. Watson further mentioned that the company is trying to enhance its cash flows. He stated that it is controlling its spending and is making sure to get its projects in pipeline to be completed soon, which could boost future revenues.

Furthermore, Chevron is also eyeing to lower its cost base, improving work flow efficiency, and matching its organizational size with future expected levels of activity to place the company in a better position. Also, focus is more towards higher return, and short term projects.

CAPEX

Chevron incurred Capital Expenditure (CAPEX) of $6.5 billion in 1Q this year, as compared to $8.6 billion in the same quarter a year ago. Out of the total CAPEX incurred, 92% was related to CAPEX in the upstream segment.

Dividend

Despite incurring heavy losses, Chevron continued to maintain its strong dividend history and declared a dividend of $1.07 per share to its common share holders. Although lower oil prices and difficult operational conditions continued to hamper overall performance, it has maintained its dividend at $1.07 level for the past eight quarters.

We believe that Chevron would maintain its dividend at this level, and would not increase owing to weakness in the oil markets. However, next year, when its Gorgon Liquefied Natural Gas (LNG) project becomes fully operational along with Wheatstone LNG which is also expected to come online, it might raise its dividend as its revenues would increase substantially owing to better LNG demand in the future.

 

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