Chevron earns $3.6 billion in first quarter, increases y-o-y production 6%

Chevron Corp. reported earnings of $3.6 billion for first-quarter 2020, compared with earnings of $2.6 billion in the first quarter 2019. Included in the current quarter was a gain of $240 million associated with the sale of upstream assets in the Philippines and favorable tax items totaling $440 million attributable to international upstream. Foreign currency effects increased earnings in the first quarter 2020 by $514 million.

Sales and other operating revenues in first quarter 2020 were $30 billion, compared to $34 billion in the year-ago period.

The first quarter year-on-year earnings increase was driven by downstream margins and increased Permian production, but the drop in commodity prices in March and continuing weakness due to reduced demand resulting from the COVID-19 pandemic are expected to put pressure on future periods as long as such conditions persist, said Michael K. Wirth, Chevron’s chairman of the board and chief executive officer.

The company noted plans to further reduce its 2020 capital expenditure guidance by up to $2 billion to $14 billion. It expects 2020 operating costs will decrease by $1 billion.

Upstream

Worldwide net oil-equivalent production was 3.24 million b/d in the quarter, an increase of over 6% from a year ago, and a new quarterly record.

US upstream operations earned $241 million in first quarter 2020, compared with earnings of $748 million a year earlier. The decrease was primarily due to lower crude oil and natural gas realizations and higher depreciation expense, partially offset by higher crude oil and natural gas production.

Net oil-equivalent production of 1.06 million b/d in first-quarter 2020 was up 180,000 b/d from a year earlier. Production increases from shale and tight properties in the Permian Basin in Texas and New Mexico were partially offset by normal field declines. The net liquids component of oil-equivalent production in first quarter 2020 increased 16% to 803,000 b/d, while net natural gas production increased 35% to 1.56 bcfd, compared to last year's first quarter.

First quarter unconventional net oil-equivalent production in the Permian Basin was 580,000 b/d, representing growth of 48% compared to a year ago.

International upstream operations earned $2.7 billion in the quarter, compared with $2.4 billion a year ago. Foreign currency effects had a favorable impact on earnings of $636 million between periods. Favorable tax items, the gain on the Philippines asset sale and favorable trading effects also contributed to the increase. Partially offsetting these items were lower crude oil and natural gas prices.

Net oil-equivalent production of 2.17 million b/d in the quarter increased 17,000 b/d from first quarter 2019. Increases from production entitlement effects, the absence of first quarter 2019 downtime at Gorgon, and other factors were largely offset by asset sale decreases of 95,000 b/d and normal field declines. The net liquids component of oil-equivalent production decreased 2% to 1.16 million b/d in first quarter 2020, while net natural gas production of 6.05 bcfd increased 4%, compared to last year's first quarter.

Downstream

US downstream operations earned $450 million in first quarter 2020, compared with earnings of $217 million a year earlier. The increase was mainly due to higher margins on refined product sales, partially offset by higher operating expenses and lower earnings from the 50%-owned Chevron Phillips Chemical Co.

Refinery crude oil input in first quarter 2020 increased 12% to 965,000 b/d from the year-ago period, primarily due to the acquisition of the Pasadena refinery in Texas.

Refined product sales of 1.16 million b/d were down 3% from first quarter 2019, mainly due to lower jet fuel and diesel sales.

International downstream operations earned $653 million in first quarter 2020, compared with $35 million a year earlier. The increase in earnings was largely due to higher margins on refined product sales, partially offset by higher operating expenses. Foreign currency effects had a favorable impact on earnings of $29 million between periods.

Refinery crude oil input of 635,000 b/d in first quarter 2020 decreased 5% from the year-ago period.

Refined product sales of 1.27 million b/d day in first quarter 2020 were down 10% from the year-ago period, mainly due to lower jet fuel, diesel, and gasoline sales resulting from travel restrictions associated with the COVID-19 pandemic.

Cash flow from operations in the first three months of 2020 was $4.7 billion, compared with $5.1 billion in the corresponding 2019 period. Excluding working capital effects, cash flow from operations in first quarter 2020 was $5.8 billion, compared with $6.3 billion in the corresponding 2019 period.

Capital and exploratory expenditures

Capital and exploratory expenditures in the first 3 months of 2020 were $4.4 billion, compared with $4.7 billion in 2019. The amounts included $1.2 billion in 2020 and $1.5 billion in 2019 for the company’s share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 88% of the companywide total in 2020.