Chevron reported third-quarter profits that fell significantly short of Wall Street estimates, causing a drop in the company’s share price during pre-market trading. The oil giant’s earnings have been impacted by a combination of declining crude prices and increased operational costs, particularly affecting its refining and chemical divisions. While the results, seen in historical context, remain strong, they are notably lower compared to the same period last year.
Chevron’s Q3 earnings stood at $6.5 billion, or $3.48 per share, a considerable drop from the $11.2 billion or $5.78 per share recorded in the corresponding period in the previous year. Adjusted profit, which accounts for one-time expenses and other factors, amounted to $3.05 per share, falling well short of analysts’ expectations of $3.75 per share, according to data from LSEG.
In response to the underwhelming earnings report, Chevron’s shares experienced a slight decline in pre-market trading, settling at $153.65.
These results come in the wake of Chevron’s recent agreement to acquire U.S. Hess Corp (HES.N) for $53 billion, a strategic move aimed at expanding its shale and deepwater oil production. This acquisition marks the latest in a series of purchases as Chevron has embarked on an aggressive expansion strategy. In addition to Hess, the company has acquired PDC Energy, a shale oil and gas producer, and ACES Delta, a hydrogen storage firm.
The earnings miss can be partially attributed to Chevron’s prior warning that maintenance activities in its oil and gas production and refining businesses would adversely affect its financial performance.
Profits derived from the extraction of oil and gas experienced a notable decline, falling by approximately 38% to $5.76 billion in the quarter, compared to $9.3 billion from the same period in the previous year. However, the volume of oil and gas production increased to 3.1 million barrels of oil and gas per day (boed), primarily driven by the acquisition of PDC Energy. In contrast, Chevron had produced 3.0 million boed in the same period a year ago.
While Chevron faced challenges in its refining business, it managed to post an operating profit of $1.68 billion in the third quarter, down from $2.53 billion during the previous year. The gains made by its U.S. refining business were offset by overseas weaknesses, where margins and inputs experienced a decline.
The backdrop for these financial results has seen oil prices rebound from a mid-year slump due to tighter supplies, which led to an increase in crude prices. This has been a welcome development in the industry, though Chevron’s recent strategic acquisitions and the impact of maintenance activities continue to influence its overall performance.
Despite the quarterly setback, Chevron’s strategic investments reflect its ongoing commitment to expanding its reserves of oil and gas while simultaneously advancing its lower-carbon business initiatives in response to evolving market dynamics.