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Will Price Gains Buoy Chevron's (CVX) Q3 Upstream Earnings?
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It's earnings season again, and oil supermajor ChevronCorporation (CVX - Free Report) is gearing up to release its third-quarter results on Oct 28. 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 strength 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 #3 (Hold) company is primarily involved in the acquisition, development and exploitation of crude oil and natural gas properties.
Click here for a complete rundown of the company’s expected Q3 performance.
A Look at Chevron’s Upstream Performance in Q2
Chevron’s production of crude oil and natural gas decreased 7.4% from the year-earlier level to 2,896 MBOE/d (58% liquids). The year-over-year decline reflected the end of the Erawan and Rokan concessions in Thailand and Indonesia, respectively, to go with entitlement effects. These factors were partly offset by strength in the Permian Basin.
The U.S. output was up 3.2% year over year to 1,172 MBOE/d, though the company’s international operations (accounting for 60% of the total) fell 13.4% to 1,724 MBOE/d.
Despite being pulled down by the dip in volumes, Chevron’s upstream segment recorded a profit of $8.6 billion in the second quarter of 2022, rocketing from $3.2 billion earned in the year-ago period and beating the Zacks Consensus Estimate of $7.5 billion.
This was primarily on account of a significant improvement in commodity prices. At $89 per barrel, Chevron’s average realized liquids prices in the United States were 64.8% above the year-earlier levels, while prices overseas jumped 64.5%. On the natural gas front, its realizations soared 188% in the United States and 87.6% overseas.
Higher Oil, Gas Prices to Boost Q3 Upstream Income
Even as fears revolving around high inflation and slowing growth somewhat cloud the outlook for oil, the space remains healthy. Apart from a positive fundamental picture, the sector has been enjoying support from geopolitical uncertainty amid Russia’s military operations in Ukraine. With the conflict showing no sign of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group OPEC agreeing on a production curtailment, the commodity has remained strong in 2022.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the third-quarter average sales price for crude is pegged at $89 per barrel, up significantly from a year earlier when the company had fetched $58 in the United States and $68 overseas.
Although the company maintains an oil-heavy production mix, natural gas still contributes some 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 from the year-ago levels. As a matter of fact, the consensus mark for the third-quarter average sales price for natural stands at $10.32 per thousand cubic feet compared to $3.25 (U.S.) and $6.28 (international) in the corresponding period of 2021.
In other words, Chevron 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 $8 billion, indicating a massive jump from the prior-year quarter’s income of $5.1 billion.
Overall Earnings & Revenue Projections
Coming back to CVX, the Zacks Consensus Estimate for third-quarter earnings is pegged at $5.10 per share, suggesting a 72.3% surge on the prior-year quarter’s reported figure of $2.96. For quarterly sales, the consensus mark of $59 billion suggests a rise of 31.9% from the year-earlier quarter’s reported number.
Important Energy Releases So Far
While we wait till Friday for CVX to come out with Q3 numbers, let’s take a look at two key energy releases so far.
Schlumberger (SLB - Free Report) , the largest oilfield contractor, announced third-quarter earnings of 63 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 55 cents. SLB recorded total revenues of $7.5 billion, outpacing the Zacks Consensus Estimate by 4.7%.
Schlumberger’s strong quarterly earnings resulted from strong activities in land and offshore resources in North America and Latin America. In further good news for investors, SLB generated a free cash flow of $1.1 billion during the period. The Zacks Rank #2 (Buy) company’s capital expenditure came in at $382 million. As of Sep 30, 2022, SLB had approximately $3.6 billion in cash and short-term investments. It had long-term debt of $12.5 billion at the end of the third quarter.
On the other hand, energy infrastructure provider Kinder Morgan (KMI - Free Report) reported third-quarter 2022 adjusted earnings per share of 25 cents, missing the Zacks Consensus Estimate of 29 cents per share. The disappointing bottom line numbers could be blamed on lower pipeline volumes of gasoline and diesel fuel, partially offset by higher contributions from KMI’s natural gas pipelines and CO2 segments.
As of Sep 30, 2022, Kinder Morgan reported $483 million in cash and cash equivalents. The company’s long-term debt amounted to $29 billion, resulting in a debt-to-capitalization of 49.6%. For 2022, KMI expects a dividend of $1.11 per share, suggesting an increase of 3% from the prior-year reported figure.
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Will Price Gains Buoy Chevron's (CVX) Q3 Upstream Earnings?
It's earnings season again, and oil supermajor Chevron Corporation (CVX - Free Report) is gearing up to release its third-quarter results on Oct 28. 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 strength 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 #3 (Hold) company is primarily involved in the acquisition, development and exploitation of crude oil and natural gas properties.
Click here for a complete rundown of the company’s expected Q3 performance.
A Look at Chevron’s Upstream Performance in Q2
Chevron’s production of crude oil and natural gas decreased 7.4% from the year-earlier level to 2,896 MBOE/d (58% liquids). The year-over-year decline reflected the end of the Erawan and Rokan concessions in Thailand and Indonesia, respectively, to go with entitlement effects. These factors were partly offset by strength in the Permian Basin.
The U.S. output was up 3.2% year over year to 1,172 MBOE/d, though the company’s international operations (accounting for 60% of the total) fell 13.4% to 1,724 MBOE/d.
Despite being pulled down by the dip in volumes, Chevron’s upstream segment recorded a profit of $8.6 billion in the second quarter of 2022, rocketing from $3.2 billion earned in the year-ago period and beating the Zacks Consensus Estimate of $7.5 billion.
This was primarily on account of a significant improvement in commodity prices. At $89 per barrel, Chevron’s average realized liquids prices in the United States were 64.8% above the year-earlier levels, while prices overseas jumped 64.5%. On the natural gas front, its realizations soared 188% in the United States and 87.6% overseas.
Higher Oil, Gas Prices to Boost Q3 Upstream Income
Even as fears revolving around high inflation and slowing growth somewhat cloud the outlook for oil, the space remains healthy. Apart from a positive fundamental picture, the sector has been enjoying support from geopolitical uncertainty amid Russia’s military operations in Ukraine. With the conflict showing no sign of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group OPEC agreeing on a production curtailment, the commodity has remained strong in 2022.
With fundamentals pointing to a tighter market, the Zacks Consensus Estimate for the third-quarter average sales price for crude is pegged at $89 per barrel, up significantly from a year earlier when the company had fetched $58 in the United States and $68 overseas.
Although the company maintains an oil-heavy production mix, natural gas still contributes some 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 from the year-ago levels. As a matter of fact, the consensus mark for the third-quarter average sales price for natural stands at $10.32 per thousand cubic feet compared to $3.25 (U.S.) and $6.28 (international) in the corresponding period of 2021.
In other words, Chevron 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 $8 billion, indicating a massive jump from the prior-year quarter’s income of $5.1 billion.
Overall Earnings & Revenue Projections
Coming back to CVX, the Zacks Consensus Estimate for third-quarter earnings is pegged at $5.10 per share, suggesting a 72.3% surge on the prior-year quarter’s reported figure of $2.96. For quarterly sales, the consensus mark of $59 billion suggests a rise of 31.9% from the year-earlier quarter’s reported number.
Important Energy Releases So Far
While we wait till Friday for CVX to come out with Q3 numbers, let’s take a look at two key energy releases so far.
Schlumberger (SLB - Free Report) , the largest oilfield contractor, announced third-quarter earnings of 63 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 55 cents. SLB recorded total revenues of $7.5 billion, outpacing the Zacks Consensus Estimate by 4.7%.
Schlumberger’s strong quarterly earnings resulted from strong activities in land and offshore resources in North America and Latin America. In further good news for investors, SLB generated a free cash flow of $1.1 billion during the period. The Zacks Rank #2 (Buy) company’s capital expenditure came in at $382 million. As of Sep 30, 2022, SLB had approximately $3.6 billion in cash and short-term investments. It had long-term debt of $12.5 billion at the end of the third quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
On the other hand, energy infrastructure provider Kinder Morgan (KMI - Free Report) reported third-quarter 2022 adjusted earnings per share of 25 cents, missing the Zacks Consensus Estimate of 29 cents per share. The disappointing bottom line numbers could be blamed on lower pipeline volumes of gasoline and diesel fuel, partially offset by higher contributions from KMI’s natural gas pipelines and CO2 segments.
As of Sep 30, 2022, Kinder Morgan reported $483 million in cash and cash equivalents. The company’s long-term debt amounted to $29 billion, resulting in a debt-to-capitalization of 49.6%. For 2022, KMI expects a dividend of $1.11 per share, suggesting an increase of 3% from the prior-year reported figure.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.