Chevron Corp reported a 44% drop in second-quarter profit on Friday, hurt by lower crude prices, weaker affiliate income, and a US$215 million loss tied to the fair value of Hess shares, even as the oil major posted record output and strong cash flow.
The U.S. oil giant posted earnings of US$2.5 billion, or US$1.45 per share, for the quarter ended June 30, compared with US$4.4 billion, or US$2.43 per share, a year earlier. Adjusted earnings fell to US$3.1 billion, or US$1.77 per share, from US$4.7 billion, or US$2.55 per share, a year ago.
CEO Mike Wirth said the results reflected “continued strong execution, record production, and exceptional cash generation”. Net oil-equivalent production rose 3% to 3.4 million barrels per day (b/d), with new company records set in the U.S. and globally. Output in the Permian Basin reached 1 million barrels per day, up 14% from a year earlier.
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Cash flow from operations rose to US$8.6 billion, one of the highest in Chevron’s history at comparable commodity prices, and adjusted free cash flow hit US$4.9 billion. The company returned US$5.5 billion to shareholders through US$2.9 billion in dividends and US$2.6 billion in share repurchases.
The drop in quarterly profit was primarily attributed to weaker oil prices, a decline in equity affiliate income, and the negative impact of the Hess share revaluation. Foreign exchange effects also reduced earnings by US$348 million. Downstream earnings were US$737 million, up from US$597 million a year ago, while upstream earnings dropped to US$2.7 billion from US$4.5 billion.
Chevron completed its acquisition of Hess Corporation in July, following a favorable arbitration ruling related to Hess’s offshore Guyana stake, bolstering its long-term production and free cash flow outlook. The addition of Hess’s assets in Guyana, the U.S. Bakken, and the Gulf of Mexico created “one of the most advantaged and differentiated portfolios in the industry”, Chevron said.
Other business highlights included a move into the U.S. lithium sector with the acquisition of 125,000 net acres in the Smackover Formation, winning offshore exploration blocks in Brazil and Egypt, and the startup of the expanded Geismar renewable diesel plant in Louisiana. Chevron also entered long-term LNG purchase contracts, bringing its U.S. Gulf Coast offtake capacity to 7 million tonnes per year.
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Capital expenditures for the quarter totaled US$3.7 billion, slightly down from US$4.0 billion in the same period last year. Chevron’s return on capital employed fell to 6.2% from 9.9% a year ago, while the net debt ratio rose to 14.8%.
The board declared a quarterly dividend of US$1.71 per share, payable September 10 to shareholders on record as of August 19.
