Chevron Corporation (CVX) — the second largest U.S. oil company — posted significantly better-than-expected first-quarter 2010 earnings. As has been the case with the other oil majors that have already reported, such as Exxon (XOM), ConocoPhillips (COP), BP Plc (BP) and Royal Dutch Shell PLC (RDS.A), results were boosted by higher crude realizations. Robust upstream production growth also contributed towards Chevron’s strong results.

Earnings per share (excluding foreign-currency effects and employee reduction charges) came in at $2.46, blowing past the Zacks Consensus Estimate of $1.94 and the year-ago adjusted profit of 75 cents. Quarterly revenue of $48.2 billion was up 33.4% from the year-earlier level.

Upstream Earnings Jump

Chevron’s total production of crude oil and natural gas increased 4.5% from the year-earlier level to 2.8 million oil-equivalent barrels per day (MMBOE/d), driven by new project start-ups (in the U.S., Nigeria, and Angola), expansion of capacity at Tengiz in Kazakhstan, together with the restoration of Gulf of Mexico volumes that were offline in the first quarter of 2009 due to hurricanes.

U.S. volumes rose 9.4%, while Chevron’s international operations experienced an approximately 2.9% rise in output. Gains on the production front were supported by higher realized oil prices, resulting in a 242.8% year-over-year rise in upstream earnings to $4.7 billion.

Production Outlook Remain Strong

Chevron’s production outlook remains one of the most robust in its peer group, with a number of major deepwater projects scheduled to come online during the next few years. Major start-ups during the last few months include the Tahiti and Perdido in the Gulf of Mexico, Frade offshore Brazil and Tombua-Landana in Angola.

Downstream Affected by Weak Refining Margins

Chevron’s downstream segment earned $196 million during the quarter, down from a profit of $753 million in the previous-year period.

Demand for refined products remained depressed in the face of plentiful supply, resulting in weak margins on the sale of gasoline and other refined products. The results were also affected by decreased refinery crude-input in the company’s U.S. operations, primarily due to the planned shutdown at the facility in Richmond, California. Partially offsetting these factors were higher earnings from chemical operations, primarily from the 50%-owned Chevron Phillips Chemical Company LLC.

Incidentally, this is the first quarter since Chevron included its chemical business within the refining operations in order to reduce costs.

Capital Expenditure & Balance Sheet

Chevron spent $4.4 billion in capital expenditures during the quarter, down from the year-earlier period’s 6.5 billion. Approximately 89% of the total outlays pertained to upstream projects. At the end of the quarter, the company had $7.4 billion in cash and long-term debt of $10.4 billion, with a debt-to-total capitalization ratio of about 9.8%.

Dividend Hiked

Recently, Chevron announced a 5.9% increase in its quarterly dividend to 72 cents per share, or $2.88 per share annualized. The dividend is payable on June 10 to shareholders of record on May 19, 2010.
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