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Chevron’s Segment-Wise Prospects in 4Q17

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Jan. 25 2018, Published 3:09 p.m. ET

Chevron’s segment-wise performance in 3Q17

In this part, we’ll look at Chevron’s (CVX) segment-wise performance and outlook in 4Q17. Between 3Q16 and 3Q17, Chevron’s earnings improved. Its upstream earnings rose from $454 million to $489 million, due to a lower loss in the domestic upstream segment. However, the company’s international upstream earnings fell.

Between 3Q16 and 3Q17, peer Royal Dutch Shell (RDS.A) saw its upstream adjusted earnings rise from $4 million to $562 million, and BP (BP) saw its upstream URC (underlying replacement cost) EBIT (earnings before interest and tax) rise from -$0.2 billion to $1.6 billion.

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Chevron’s downstream earnings rose 70% year-over-year to $1.8 billion in 3Q17, due to higher international and domestic downstream earnings. International downstream earnings rose due to asset sales gains partly offset by narrower margins and higher operating expenses, and domestic downstream earnings rose due to wider refining margins.

Chevron’s 4Q17 outlook

Between 4Q16 and 4Q17, Chevron’s upstream and downstream earnings are likely to rise. Brent and WTI (West Texas Intermediate) rose from $51 and $49 per barrel, respectively, to $62 and $55 per barrel. Usually, everything else being equal, higher crude oil prices suggest a likely improvement in Chevron’s upstream earnings, assuming no decline in volumes year-over-year.

Chevron’s downstream earnings are likely to be influenced by wider refining cracks. The US Gulf Coast WTI 3-2-1 crack, the broader market crack indicator, expanded 37% to $18 per barrel between 4Q16 and 4Q17.

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