Chevron’s 3Q’17 Earnings To Surge On Higher Production And Cost Savings
Chevron (NYSE:CVX), one of the world’s largest integrated energy companies, is slated to release its September quarter financial performance on 27th October 2017((Chevron To Announce September Quarter 2017 Results, www.chevron.com)), the same day Exxon Mobil (NYSE:XOM), its closest competitor, announces its results for the quarter. Similar to the last quarter, the market expects the company to post solid improvement in its earnings, backed by higher production growth at lower operating costs. Also, the company’s liquidity is likely to improve, as it lowered its capital expenditure budget for 2017 from $19.8 billion to $19 billion.
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Key Trends Witnessed In 3Q’17
- Commodity prices remained volatile in the last three months due to the impact of various hurricanes and storms along the US coastline. Despite this, the WTI crude oil prices averaged at $48.18 per barrel for the September quarter, almost the same as the previous quarter. With no significant improvement in commodity prices, Chevron’s upstream 3Q’17 revenues are highly dependent on its production volumes.
- Due to the heavy rains and floods caused by Hurricane Harvey in early September, Chevron had to shut down its Baytown refinery in the US Gulf Coast for a few days. Though the company resumed its operations quickly, this could impact its downstream performance for the quarter.
- On the operational front, Chevron announced that it has started producing liquefied natural gas (LNG) at its Wheatstone Project in Western Australia. The first cargo is expected to be shipped in the coming weeks. At full capacity, the Wheatstone Project’s two train LNG facility will supply 8.9 million metric tons per year of LNG for export to customers in Asia.
- In the last quarter, Chevron had reduced its 2017 capital investment budget from $19.8 billion to $19 billion in order to manage the bleak outlook of commodity markets. However, the company continued to uphold its production growth target of 4%-9% (without the impact of asset sales) for the year. The production numbers could vary depending upon the start-up and ramp-up of the Wheatstone project, baseline declines, or unexpected operational issues or turnarounds.
- Lastly, the company has announced that Michael K. Wirth will be appointed as the Chairman and Chief Executive Officer (CEO), effective 1st February 2018. Wirth will succeed John S. Watson after he retires from the post of CEO next year. Wirth has a strong track record of accomplishments and values in his 35-year career with the company and is expected to contribute to the company’s future success through his knowledge, experience, and leadership skills.
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