Chevron’s (CVX.N) share price fell in pre-market trade after the company reported a third-quarter profit that significantly undershot Wall Street projections.
Since crude prices have softened and rising expenses have squeezed refining and chemical revenues, oil firm earnings have fallen from record highs set a year ago. Though much below levels from a year ago, the results are still strong by historical standards.
In comparison, the company’s earnings for the same time last year were $11.2 billion, or $5.78 per share, as opposed to $6.5 billion, or $3.48 per share. LSEG data shows that adjusted earnings were $3.05 per share vs analysts’ projected $3.75 per share.
In pre-market trade, shares dropped 2% to $151.14. The outcomes follow Chevron’s $53 billion agreement to acquire US-based Hess Corp. (HES.N) to increase its deepwater and shale oil output. Apart from Hess, it also bought PDC Energy, a shale oil and gas producer, and a controlling interest in ACES Delta, a company that stores hydrogen.
The company’s warning that maintenance in its oil and gas production and processing divisions would negatively impact profits before the earnings shortfall. Additionally, it had a setback in a project involving Kazakhstan, wherein it took almost six months to extend gas and oil production at its Tengizchevroil facility.
“Shareholders of CVX are going to have a difficult day,” commented RBC analyst Biraj Borkhataria, who characterized the profits decline as “disappointing” but attributed it to non-recurring expenses.
During the quarter, capital expenditures increased by almost 50% to $4.7 billion, mostly related to the purchase of ACES Delta. The Tengizchevroil expansion project is anticipated to cost an additional $1 billion in total.
The profit from pumping gas and oil dropped from $9.3 billion to $5.76 billion in the quarter, a 38% decrease from the previous year. However, after acquiring PDC Energy, the output increased to 3.15 million barrels of oil and gas daily. A year earlier, it pumped 3.02 million dollars.
Following a decline in the middle of the year, oil prices have lately increased due to limited supply. The business’s operating cash flow decreased to $9.7 billion from $15.3 billion in the previous year.
Refining division operating profit decreased to $1.68 billion from $2.53 billion in the previous year. As inputs and margins decreased, losses elsewhere offset gains from its refining operations in the United States.
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