Earnings Preview : Chevron Corporation (NYSE: CVX) First Quarter 2010
Thursday, April 29, 2010 1:51 PM

Chevron Corporation is scheduled to report its Q1 2010 results before market opens on April 30, 2010. Chevron released its 1Q 2010 Interim update, guiding towards a sequential improvement in both E&P and downstream earnings from 4Q09. Upstream production volumes were up 3.7% YoY through the first two months of the quarter, as strong international production offset the loss of 20kb/d in the US due to the absence of a favorable royalty settlement in 4Q. Upstream realization were better than expected in both liquids (+1.27/bbl) and gas (+$0.50/mcf). Most impressive is the resilience in downstream earnings (+$82m), despite the inclusion of a $150m charge for severance payments in the refining segment.  
Chevron is the fifth-largest integrated energy company in the world. Headquartered in San Ramon, California, and conducting business in approximately 180 countries, this highly competitive corporation is engaged in every aspect of the oil and natural gas industry, including exploration and production; refining, marketing and transportation; chemicals manufacturing and sales; and power generation. 
As for Q4 2009, Chevron Corporation reported earnings of $3.07 billion ($1.53 per share - diluted) for the Q4 2009, compared with $4.90 billion ($2.44 per share - diluted) in the Q4 2008. Foreign-currency effects reduced earnings in the 2009 quarter by $67 million, compared with a benefit to income of $478 million a year earlier. Sales and other operating revenues in the Q4 2009 were $48 billion, compared with $43 billion in the year-ago quarter. Worldwide net oil-equivalent production was 2.78 million barrels per day in the Q4 2009, up 238,000 from 2.54 million barrels per day in the 2008 Q4. U.S. upstream earnings of $1.04 billion in the Q4 of 2009 were down $105 million from a year earlier. International upstream earnings of $2.96 billion increased $956 million from the Q4 2008 due mainly to the impact of higher prices and sales volumes for crude oil. U.S. downstream operations lost $345 million in the Q4 2009, while refinery crude-input of 856,000 barrels per day in the Q4 2009 decreased 74,000 barrels per day from the year-ago period and refined-product sales of 1.35 million barrels per day were down 60,000 barrels per day from the Q4 of 2008. International downstream operations incurred losses of $268 million in the Q4 2009, compared with earnings of $1.05 billion a year earlier. Chemical operations earned $98 million in the Q4 of 2009, compared with $28 million in the year-ago period.
Analysts' estimates for Q1 2010 range from a low of $1.39 to a high of $2.05, compared to a consensus estimate of $1.88, with number of estimates being 14 and the co-efficient variance 9.20. Q1 2010 net income is expected to roll in at $4,155 million, up 35% from Q4 2009 net income of $3,070 million and EPS is likely to be $2.07. Based on the interim trading update from Chevron, production growth for Q1-o-Q1 is expected to amount to 3.8% to average 2,763 million boepd. Upstream earnings are expected to be higher than Q4 2009 ($4,003m); a small increase to $4,041m given modest QoQ price increases partly offset by slightly lower production, specifically in high margin regions such as the Gulf of Mexico is likely. As for Downstream, which for the first time will combine Oil Products and Chemicals, is likely to profit following Q4 2009 extreme losses of $(515)m. Earnings of $339m, which splits $201m Oil Products (including $(150)m for employee severances) and $138m Chemicals are expected. A DPS increase from the quarterly run rate of $0.68 to $0.70 (FY 2010E $2.80) is quite possible.
The stock closed $80.62, up +0.49% on April 29, 2010 and most analysts' recommend this stock as a relative Overweight with an average price target of $94.00.


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