Higher Price Realizations To Drive Chevron’s 2Q’18 Results

by Trefis Team
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Chevron (NYSE:CVX), one of the world’s largest integrated energy companies, is slated to release its June quarter financial performance on 27th July 2018, 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 a solid improvement in its earnings, backed by higher production growth and improved price realization. Further, the company’s relentless efforts to control its operating costs and capital spending are likely to bolster its bottom-line for the quarter as well as the full year.

We currently have a price estimate of $133 per share for the company, which is 6% higher than its market price. View our interactive dashboard for Chevron and modify the key drivers to see the impact on the company’s valuation.

Key Trends To Watch For In 2Q’18 Results

  • Crude oil prices have seen a rebound in the first half of 2018 due to the extension of the Organization of Petroleum Exporting Countries’ (OPEC) production cuts until the end of 2018. The WTI crude oil prices averaged at around $68.06 per barrel for the June quarter, notably higher than the $48.10 per barrel of the same quarter of last year. Accordingly, we expect Chevron to see higher price realization for the quarter, which will, in turn, drive its upstream revenue.
  • In terms of production, Chevron output is likely to grow driven by its robust pipeline of projects that are likely to add roughly 2,150 thousand barrels of oil equivalent per day (MBOED) of additional production capacity over the next 3-4 years.

  • Chevron continues to divest its non-core assets to enhance its cost structure, while allowing it to manage its cash flows to meet its capital spending and debt repayment needs. These asset sales have not only proved to be accretive to the company’s operating profits, but also allows it to focus on only shorter-cycle and high return investments.
  • The company has also made significant headway in bringing down its operational costs by improving the operational efficiency of its existing assets through the use of data analytics and advanced drilling technologies. We expect Chevron to realize notable cost savings in this quarter, which will boost its earnings.

Do not agree with our forecast? Create your own price forecast for Chevron by changing the base inputs (blue dots) on our interactive dashboard.

 

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