Chevron’s Segments in 2Q16: Upstream Continues to Report Losses



Chevron’s segments in 2Q16

Chevron (CVX) reported a loss in 2Q16 due to its Upstream segment. The Upstream segment posted a loss in 2Q15 and a heavy loss in 2Q16. Chevron’s upstream segment reported a steep fall in its earnings to -$2.5 billion in 2Q16.

The segment’s earnings were impacted by impairments. Also, the steep falls in oil and natural gas prices dented the earnings. This was partly offset by lower operating and exploration costs. The average price of Brent crude oil fell from $62 per barrel in 2Q15 to $46 per barrel in 2Q16.

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Downstream segment fell

Chevron’s downstream segment saw its earnings fall by 57% to $1.3 billion in 2Q16—compared to 2Q15. This was due to the decline in refining margins. It was partly offset by lower operating expenses in US downstream operations in 2Q16 compared 2Q15. In 2Q16, Chevron had lower earnings from its stake, around 50%, in Chevron Phillips Chemical Company.

Chevron’s international downstream operations also saw lower refined product margins in 2Q16. Crude oil input volumes fell YoY (year-over-year)—this impacted the operations.

Peers’ segmental trends

Chevron’s peers also saw their segmental dynamics change. Earnings from ExxonMobil’s (XOM) upstream segment fell by 86% YoY to $294 million in 2Q16.

BP’s upstream segment contributed 20% to its underlying replacement cost and earnings before interest and tax in 2Q15—it contributed 2% in 2Q16. Suncor’s (SU) oil sands segment earned profits in 2Q15—it posted a loss in 2Q16.

The PowerShares Dynamic Large Cap Value Portfolio (PWV) has ~5% exposure to energy sector stocks.


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