Chevron Q1 Earnings Fall to $5.5B, Beats EPS with $2.93

Key Takeaway

• Chevron's Q1 earnings fell to $5.5 billion amid a drop in natural-gas prices, yet slightly beat expectations with EPS of $2.93.
• Despite a 4.1% revenue decrease to $48.72 billion, Chevron increased worldwide production by 12%, highlighting operational strength.
• Sector impact: Chevron and Exxon Mobil's reports contributed to a downturn in U.S. energy stocks, with geopolitical tensions adding uncertainty.

Chevron's Earnings Overview

Chevron Corp. experienced a decline in its stock value, marking its first loss in eight sessions following the announcement of its first-quarter earnings. Despite a challenging environment characterized by a significant drop in natural-gas prices, Chevron managed to surpass expectations. The company reported a net income of $5.5 billion, or $2.97 per share, a decrease from the previous year's $6.57 billion, or $3.46 per share. This decline was attributed mainly to lower margins on refined-product sales and reduced natural-gas realizations. However, Chevron's adjusted earnings per share stood at $2.93, slightly above the FactSet consensus of $2.92. Revenue also saw a decrease of 4.1% to $48.72 billion but still managed to exceed the FactSet consensus of $48.42 billion.

Production and Shareholder Returns

Chevron highlighted a 12% increase in worldwide production, bolstered by a 35% jump in U.S. production. This growth was primarily due to the acquisition of PDC Energy and robust performance in the Permian and Denver-Julesburg basins. Notably, Chevron revised its production expectations for the Permian upwards for the first half of the year. Despite a 2.2% drop in international production, the company's operational strength was evident. Chevron also demonstrated its commitment to rewarding shareholders by returning $6 billion in the quarter, including $3 billion through dividends and nearly $3 billion in share repurchases.

Sector and Market Impact

The broader energy sector faced headwinds as both Chevron and Exxon Mobil Corp. reported earnings that led to a downturn in U.S. energy stocks. Exxon Mobil's shares fell nearly 4%, and Chevron's by 0.8%, reflecting the market's reaction to their financial performances. These results have cast a shadow over the energy sector's leading edge in the S&P 500, where both companies hold significant influence. Analysts and investors closely monitored these developments, considering the strategic implications for the sector's future.

Geopolitical Tensions and Strategic Disputes

The energy sector's outlook is further complicated by geopolitical tensions and strategic disputes. Exxon Mobil, in particular, faces challenges from escalating tensions in the Middle East and Russia, with its CFO describing the situation as "pretty troubling." Additionally, Exxon is embroiled in a dispute with Chevron over the latter's bid for Hess Corp., highlighting the strategic importance of Exxon's significant offshore oil discovery in Guyana. This dispute adds a layer of uncertainty to the companies' future prospects, despite Exxon's strong performance in the region.

Street Views

• Ryan Todd, Piper Sandler (Bullish on Chevron):

  "Chevron’s operations are strong, and the company continues to reward shareholders."

• Peter McNally, Third Bridge (Bullish on Chevron):

  "Chevron reported a solid first-quarter result, driven primarily by strong operational performance."