USA energy major Chevron Corp. said fourth quarter earnings were down sharply from a year ago and there are few signs of relief looking ahead.
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Chevron Corporation (NYSE:CVX) announced its earnings for the fourth quarter of the fiscal year 2015 (4QFY15) during pre-market trading on Friday.
Although Chevron still desperately needs oil prices to recover, it’s doing numerous right things it needs to do to (1) survive the glut, and (2) come out of the glut ready to soar.
Chairman and CEO John Watson said, “Operating expenses and capital spending were reduced $9 billion in 2015 from 2014, and I expect similarly large reductions again in 2016”.
Energy companies are spending less on exploration and production as capital evaporates in response to lower crude oil prices.
The loss compares to a profit of $3.47 billion for the year ago fourth quarter.
The results did not meet Wall Street expectations, but Chevron does not adjust its reported results based on one-time events such as asset sales.
On average, nineteen analysts expected the company to report earnings of $0.46 per share for the quarter. Revenue tumbled 37 per cent to $US29.25 billion. The payout, which hasn’t been raised since April 2014, will cost the company about $2 billion. Revenue was reported as $138.48 billion.
The shares closed down -0.83 points or -0.99% at $83.29 with 1,23,80,644 shares getting traded. “We’re taking significant action to improve earnings and cash flow in this low price environment”.
In the US, Chevron garnered just US$35 a barrel for oil sold, compared with US$66 a barrel a year ago.
Chevron’s US oil and gas business posted a $1.95 billion loss for the period as falling crude prices that lessened the future value of its fields added to the pain from rising exploration expenses. Capital and exploratory expenditures, 92% weighted to the upstream, totaled $34 billion, versus $40 billion in 2014. Excluding working capital effects, cash flow from operations in 2015 was $21.4 billion, compared with $32.0 billion in 2014. The average sales price of natural gas was $1.54 per thousand cubic feet, compared with $3.34 in last year’s fourth quarter.
The results from Chevron were hurt due to charges of $1.1 billion as the drop in prices of oil and gas slashed the earnings power long term of its portfolio of gas and oil holding.
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It’s also worth noting the $588 million loss would have been a $512 million profit were it not for an accounting write-down of $1.1 billion, to reflect the lowered value of some of its properties and cancelled projects stemming from the pullback in oil prices.
