U.S. energy behemoth Chevron Corp. (CVX) released its first-quarter 2011 interim update, covering the first 2 months of the quarter. On the whole, the update is moderately bullish, with earnings expected to be higher than the previous quarter.
The company expects results for the Exploration and Production arm to be buoyed by a rise in crude oil prices, partially offset by lower liftings. However, the San Ramon, California-based integrated major cautioned that first quarter refining and chemicals results would be hampered by reduced asset sales gains, largely offset by higher domestic margins.
Additionally, Chevron expects net after-tax charges associated with corporate and other activities to come in between $250 million and $350 million.
Upstream
The company reported that oil and natural gas production averaged 2.748 million oil-equivalent barrels per day, slightly below the first quarter 2010 level, as strength in Chevron’s international operations were not enough to make up for reduced domestic volumes. Production would also be down by more than a percent from the fourth quarter 2010 level, reflecting worldwide deterioration.
In the first two months of the March quarter, Chevron’s total domestic oil equivalent production fell 12,000 barrels per day from fourth-quarter levels, primarily due to small decreases across a number of assets. Net international oil equivalent production was down by 26,000 barrels per day from the preceding quarter due to maintenance activity in Angola and weather-related downtime in Australia and the United Kingdom.
U.S. crude price realizations during January-February 2011 averaged $88.23 per barrel, up from $79.56 in the fourth quarter 2010, while international realizations were higher by $12.24 to $91.33 per barrel. Chevron’s domestic realized natural gas prices for this period averaged $4.15 per thousand cubic feet (Mcf), compared with $3.65 in the fourth quarter. Average international natural gas realizations were up 15 cents per Mcf to $4.96.
Downstream
Regarding downstream operations (chemical and refining), the second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM) said that its U.S. refinery crude-input fell 6,000 barrels per day (0.7%) from the previous quarter due to maintenance activities across multiple refineries.
However, ex-U.S., Chevron’s refinery crude-input volumes were broadly in line with fourth quarter results. First quarter refining margins increased $2.58 per barrel sequentially on the U.S. West Coast and $6.04 per barrel on the Gulf Coast.
Chevron plans to release its quarterly results on April 29, 2011, before the start of trading. The Zacks Consensus Estimate for Chevron’s first quarter is $2.85 per share, higher than the earnings (excluding foreign-currency effects and employee reduction charges) of $2.46 in the year-ago period and $2.49 (excluding adjustments for downstream asset sales and foreign-currency effects) in the previous quarter.
Chevron shares currently retain a Zacks #2 Rank, which translates into a short-term Buy rating. Longer-term, we are maintaining our Neutral recommendation on the stock.
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