Chevron’s Segments Suffer across the Board



Chevron’s segment-by-segment analysis in 4Q15

Chevron (CVX) reported losses in 4Q15 due to its upstream segment’s earnings’ steep plunge. Earnings from its upstream segment slumped from $2.7 billion in 4Q14 to -$1.4 billion in 4Q15.

The upstream segment, which contributed 77% of total earnings in 4Q14, turned into a loss-making segment in 4Q15. This was due to the steep fall in oil prices coupled with increased exploration costs and higher impairments. Brent average prices fell from $77 per barrel in 4Q14 to $43 per barrel in 4Q15.

Plus, CVX’s refining and chemical segments noted falls in earnings in 4Q15. Chevron’s downstream segment saw its earnings fall from $1.5 billion in 4Q14 to $1 billion in 4Q15. This was due to lower gains on asset sales and unfavorable changes in effects of derivative instruments.

Even on a sequential basis, CVX’s downstream segment earnings fell. This was due to lower refining margins, turnarounds at the Richmond and El Segundo refineries, lower chemical margins, and higher operating costs in the company’s US downstream segment in 4Q15 compared to 3Q15.

Plus, in the fourth quarter, CVX’s international downstream operation suffered unfavorable foreign exchange and timing effects, partially offset by higher margins in Asian markets compared to 3Q15.

Article continues below advertisement

Chevron’s peers’ segment trends

Downstream segment earnings, which fell in 4Q15, had been rising steeply until 3Q15. On the other hand, upstream segment earnings have been falling for the past few quarters. CVX’s peer ExxonMobil (XOM) saw upstream segment earnings fall from 80% in 3Q14 to 32% in 3Q15.

Likewise, BP’s (BP) upstream segment, which contributed 70% to URC EBIT (underlying replacement cost and earnings before interest and tax) in 3Q14, contributed 25% in 3Q15. Royal Dutch Shell’s (RDS.A) upstream segment turned into a loss-making segment in 3Q15.

The PowerShares Dynamic Large Cap Value ETF (PWV) has ~11% exposure to energy sector stocks, including Chevron.


More From Market Realist