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Expect a Strong Q1 Show From Chevron's (CVX) Upstream Unit
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It's earnings season again and oil supermajor Chevron (CVX - Free Report) is gearing up to release its first-quarter results on Apr 29. This time around, the primary contributor to the company’s earnings — its upstream (or exploration and production) division — is likely to have benefited from the ongoing momentum in oil and natural gas prices. Chevron also has a downstream business, which refines crude oil into fuels like gasoline and diesel oil.
Chevron has extensive upstream operations in all major hydrocarbon-producing regions of the world. The Zacks Rank #2 (Buy) company is primarily involved in the acquisition, development and exploitation of crude oil and natural gas properties.
A Look at Chevron’s Upstream Performance in Q4
Chevron’s production of crude oil and natural gas decreased 4.9% from the year-earlier level to 3,117 thousand oil-equivalent barrels per day/MBOE/d (59% liquids), but it was the fifth successive quarter wherein volumes topped 3 million barrels per day. The year-over-year decline reflects losses due to divestments, entitlement effects and the end of the Rokan concession in Indonesia, which were partly offset by strength in the Permian Basin, the absence of weather-related drops in the Gulf of Mexico and lower production curtailments.
U.S. output was up 1.8% year over year to 1,216 MBOE/d, though the company’s international operations (accounting for 61% of the total) fell 8.7% to 1,901 MB(CVX - Free Report) OE/d.
Despite being pulled down by the dip in volumes, Chevron’s upstream segment recorded a profit of $5.2 billion in the fourth quarter of 2021, rocketing from the $501 million earned in the year-ago period when the energy sector was gradually coming out of the devastated by the pandemic-induced demand destruction and price plunge.
This was primarily on account of a significant improvement in commodity prices. At $63 per barrel, Chevron’s average realized liquids prices in the U.S. were almost double the year-earlier levels while prices overseas jumped 85%. On the natural gas front, its realizations soared 221% and 86.8%.
Higher Oil, Gas Prices to Boost Q1 Upstream Income
Benchmark oil prices have risen sharply so far in 2022, thanks to geopolitical uncertainty amid Russia’s military operations in Ukraine. Last month, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity. The Biden administration’s ban on the import of Russian crude and energy products contributed to oil’s rapid price increase.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the average sales price for crude in first-quarter 2022 is pegged at $86 per barrel, up significantly from a year earlier when the company had fetched $48 in the United States and $56 overseas.
Although the company maintains an oil-heavy production mix, natural gas still contributes around 40% to the total volume. This healthy exposure to natural gas could also work in Chevron’s favor as the price of natural gas has soared compared to the year-ago levels. As a matter of fact, the consensus mark for the first-quarter average sales price for natural stands at $5.75 per thousand cubic feet compared to $2.15 (U.S.) and $4.72 (international) in the corresponding period of 2021.
Chevron, like its peer ExxonMobil (XOM - Free Report) , is set to benefit from the spike in crude and natural gas prices. For the to-be-reported quarter, the Zacks Consensus Estimate for the upstream segment is pegged at a profit of $6.5 billion, indicating a massive jump from the prior-year quarter’s income of $2.4 billion.
For Zacks Rank #1 (Strong Buy) ExxonMobil’s upstream segment, the massive improvement in commodity prices could have increased first-quarter 2022 earnings by up to $2.7 billion from the previous quarter’s levels. Per a recent filing, XOM expects operating profits from oil and gas operations of up to $9.3 billion, the highest for any quarter since 2017.
The company projects operating results in the first quarter from the oil and liquids businesses to improve $1.9-$2.3 billion compared with the December-end quarter of 2021, thanks to an uptick in oil prices. The improvement in natural gas prices is likely to have contributed up to $400 million to upstream business profits, as estimated by ExxonMobil.
Overall Earnings & Revenue Projections
Coming back to CVX, the Zacks Consensus Estimate for first-quarter earnings is pegged at $3.44 per share, suggesting a 282.2% surge on the prior-year quarter’s reported figure of 90 cents. For quarterly sales, the consensus mark of $46.5 billion suggests a rise of 45.2% from the year-earlier quarter’s reported number.
Important Energy Releases So Far
While we wait till Friday for CVX and XOM to come out with their respective Q1 numbers, let’s take a look at two key energy releases so far.
Schlumberger (SLB - Free Report) , the largest oilfield contractor, announced first-quarter earnings of 34 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 32 cents. SLB recorded total revenues of $6 billion, outpacing the Zacks Consensus Estimate by 1.2%.
Schlumberger’s strong quarterly earnings resulted from strong drilling activities in North America, Latin America and the Middle East. Higher evaluation and intervention activities across the international offshore markets also buoyed the company’s first-quarter results. In more good news for investors, SLB raised its quarterly dividend by 40% to 17.5 cents per share (or 70 cents per share annualized).
Smaller rival Halliburton (HAL - Free Report) reported first-quarter adjusted net income per share of 35 cents, in line with the Zacks Consensus Estimate. The company had reported a profit of 19 cents in the year-ago quarter. HAL’s performance reflects stronger-than-expected profit from its Drilling and Evaluation division.
Meanwhile, revenues of $4.3 billion were 24.1% higher than the year-ago quarter and came ahead of the Zacks Consensus Estimate by 2.4%. North American revenues rose 37.1% year over year to $1.9 billion, while revenues from Halliburton’s international operations were up 15.2% from the year-ago period to $2.4 billion.
Image: Bigstock
Expect a Strong Q1 Show From Chevron's (CVX) Upstream Unit
It's earnings season again and oil supermajor Chevron (CVX - Free Report) is gearing up to release its first-quarter results on Apr 29. This time around, the primary contributor to the company’s earnings — its upstream (or exploration and production) division — is likely to have benefited from the ongoing momentum in oil and natural gas prices. Chevron also has a downstream business, which refines crude oil into fuels like gasoline and diesel oil.
Chevron has extensive upstream operations in all major hydrocarbon-producing regions of the world. The Zacks Rank #2 (Buy) company is primarily involved in the acquisition, development and exploitation of crude oil and natural gas properties.
A Look at Chevron’s Upstream Performance in Q4
Chevron’s production of crude oil and natural gas decreased 4.9% from the year-earlier level to 3,117 thousand oil-equivalent barrels per day/MBOE/d (59% liquids), but it was the fifth successive quarter wherein volumes topped 3 million barrels per day. The year-over-year decline reflects losses due to divestments, entitlement effects and the end of the Rokan concession in Indonesia, which were partly offset by strength in the Permian Basin, the absence of weather-related drops in the Gulf of Mexico and lower production curtailments.
U.S. output was up 1.8% year over year to 1,216 MBOE/d, though the company’s international operations (accounting for 61% of the total) fell 8.7% to 1,901 MB(CVX - Free Report) OE/d.
Despite being pulled down by the dip in volumes, Chevron’s upstream segment recorded a profit of $5.2 billion in the fourth quarter of 2021, rocketing from the $501 million earned in the year-ago period when the energy sector was gradually coming out of the devastated by the pandemic-induced demand destruction and price plunge.
This was primarily on account of a significant improvement in commodity prices. At $63 per barrel, Chevron’s average realized liquids prices in the U.S. were almost double the year-earlier levels while prices overseas jumped 85%. On the natural gas front, its realizations soared 221% and 86.8%.
Higher Oil, Gas Prices to Boost Q1 Upstream Income
Benchmark oil prices have risen sharply so far in 2022, thanks to geopolitical uncertainty amid Russia’s military operations in Ukraine. Last month, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity. The Biden administration’s ban on the import of Russian crude and energy products contributed to oil’s rapid price increase.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the average sales price for crude in first-quarter 2022 is pegged at $86 per barrel, up significantly from a year earlier when the company had fetched $48 in the United States and $56 overseas.
Although the company maintains an oil-heavy production mix, natural gas still contributes around 40% to the total volume. This healthy exposure to natural gas could also work in Chevron’s favor as the price of natural gas has soared compared to the year-ago levels. As a matter of fact, the consensus mark for the first-quarter average sales price for natural stands at $5.75 per thousand cubic feet compared to $2.15 (U.S.) and $4.72 (international) in the corresponding period of 2021.
Chevron, like its peer ExxonMobil (XOM - Free Report) , is set to benefit from the spike in crude and natural gas prices. For the to-be-reported quarter, the Zacks Consensus Estimate for the upstream segment is pegged at a profit of $6.5 billion, indicating a massive jump from the prior-year quarter’s income of $2.4 billion.
For Zacks Rank #1 (Strong Buy) ExxonMobil’s upstream segment, the massive improvement in commodity prices could have increased first-quarter 2022 earnings by up to $2.7 billion from the previous quarter’s levels. Per a recent filing, XOM expects operating profits from oil and gas operations of up to $9.3 billion, the highest for any quarter since 2017.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The company projects operating results in the first quarter from the oil and liquids businesses to improve $1.9-$2.3 billion compared with the December-end quarter of 2021, thanks to an uptick in oil prices. The improvement in natural gas prices is likely to have contributed up to $400 million to upstream business profits, as estimated by ExxonMobil.
Overall Earnings & Revenue Projections
Coming back to CVX, the Zacks Consensus Estimate for first-quarter earnings is pegged at $3.44 per share, suggesting a 282.2% surge on the prior-year quarter’s reported figure of 90 cents. For quarterly sales, the consensus mark of $46.5 billion suggests a rise of 45.2% from the year-earlier quarter’s reported number.
Important Energy Releases So Far
While we wait till Friday for CVX and XOM to come out with their respective Q1 numbers, let’s take a look at two key energy releases so far.
Schlumberger (SLB - Free Report) , the largest oilfield contractor, announced first-quarter earnings of 34 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 32 cents. SLB recorded total revenues of $6 billion, outpacing the Zacks Consensus Estimate by 1.2%.
Schlumberger’s strong quarterly earnings resulted from strong drilling activities in North America, Latin America and the Middle East. Higher evaluation and intervention activities across the international offshore markets also buoyed the company’s first-quarter results. In more good news for investors, SLB raised its quarterly dividend by 40% to 17.5 cents per share (or 70 cents per share annualized).
Smaller rival Halliburton (HAL - Free Report) reported first-quarter adjusted net income per share of 35 cents, in line with the Zacks Consensus Estimate. The company had reported a profit of 19 cents in the year-ago quarter. HAL’s performance reflects stronger-than-expected profit from its Drilling and Evaluation division.
Meanwhile, revenues of $4.3 billion were 24.1% higher than the year-ago quarter and came ahead of the Zacks Consensus Estimate by 2.4%. North American revenues rose 37.1% year over year to $1.9 billion, while revenues from Halliburton’s international operations were up 15.2% from the year-ago period to $2.4 billion.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.