Chevron Corp. exceeded profit expectations as higher oil and natural gas prices, along with supplies from the acquisition of Hess Corp., outweighed production outages stemming from the Iran war. The company reported adjusted first-quarter net income of US$1.41 per share, surpassing the average analyst estimate by 51 cents, according to a Bloomberg survey.
Strong Performance Despite Challenges
Surging prices for crude and gas, combined with growth from Chevron's new stake in a giant Guyanese field, helped cushion the blow from a five percent sequential drop in overall output. The company had previously warned of significant accounting losses on derivatives tied to cargoes that had not yet reached their destinations, which prompted some analysts to slash estimates. This factor may have contributed to the magnitude of the earnings beat.
Key Drivers of Earnings
Chevron's outsized earnings were largely driven by swelling prices for real-world oil from regions such as Kazakhstan, as well as fat margins from processing the company's own crude through refineries, according to Chief Financial Officer Eimear Bonner. "Bottom line, execution exceeded expectations," she said in an interview.
Other major oil companies, including BP Plc and TotalEnergies SE, also exceeded forecasts when they reported earlier this week, boosted by strong trading results.
Stock Buybacks and Future Outlook
Chevron bought back US$2.5 billion of stock during the quarter, 16 percent less than the previous period and at an annual rate at the bottom of its US$10 billion-to-US$20 billion guidance range. Some analysts had speculated the company might increase repurchases, but Bonner indicated that the company is cautious about boosting buybacks based solely on the recent jump in energy prices. "What we'd need to see is something more durable in the fundamental outlook, more of a structural price update for us to be making any adjustments," she said. "For now, we're happy with where we are."
Production and Acquisition Impact
The US$60 billion acquisition of Hess, combined with growing production from the U.S. Gulf of Mexico and the Permian Basin, ensured that Chevron's production was higher than a year ago, more than offsetting outages in Israel, the partitioned zone between Saudi Arabia and Kuwait, and Kazakhstan. However, the company was not immune from the impacts of the war. Its international refining division lost US$1 billion due to "lower margins on refined product sales," unfavorable accounting effects, and higher transportation costs.
Overall, Chevron's strong quarterly results demonstrate the resilience of its business model amid geopolitical turmoil and volatile energy markets.
