Chevron's Integrated Approach Boosts Q1 Performance Despite Weaker Natural Gas Prices
Chevron Showcases How Integration Can Pay Big Dividends in the Oil Patch
The integrated energy company delivered solid first-quarter results despite much weaker natural gas prices. Chevron (NYSE: CVX) has an integrated business model, meaning it operates in the upstream (oil and gas production), midstream (transportation and storage), and downstream (chemicals and refining) sectors.
Drilling down into Chevron's first-quarter earnings
Chevron produced $5.4 billion, or $2.93 per share, of adjusted earnings in the first quarter. While that was down from $6.7 billion in the year-ago period (and $6.4 billion in the preceding fourth quarter), its earnings were just above analysts' consensus estimate of $2.92 per share.
- Two factors weighed on Chevron's earnings. Natural gas prices plunged (the price it realized for gas sold in the U.S. cratered 51.9% year over year while international price realizations fell 19.4%), and margins for refined products declined.
- The company offset some of that impact thanks to the strength of its U.S. upstream operations. That part of the business generated nearly $2.1 billion of earnings (up from $1.7 billion in the year-ago period and a $1.3 billion loss in the previous quarter sequentially).
The cash-return gusher continues
Chevron produced $6.8 billion of cash flow from operations during the quarter. While that was down from $7.2 billion in last year's first quarter and $12.4 billion in the previous quarter, it was a solid amount for the company.
- Chevron and its affiliates reinvested $4.7 billion of that cash flow into capital projects, an increase from $3.9 billion in the year-ago period.
- It's also investing in building out several lower-carbon businesses, advancing its carbon capture, hydrogen, and renewable fuels projects in the quarter.
Chevron produced solid results during the first quarter, with strong U.S. production growth helping offset weaker natural gas prices and refining margins. Its integrated business continues to generate lots of cash, the bulk of which it returns to shareholders, and an elite balance sheet allows it to weather energy market volatility. All these attributes continue to make it a rock-solid energy stock to hold long over the long term, especially for investors seeking an attractive and rising income stream.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.