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Chevron’s Downstream Margin Trends in 4Q17

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Dec. 4 2020, Updated 10:53 a.m. ET

Series overview

In this series, we provided an update on Chevron’s latest financial and operational performance. In the first few parts, we reviewed Chevron’s debt and cash flow position. Next came analyst ratings for the company. Then we discussed CVX’s capex activities in 4Q17, followed by segmental earnings trends and the growing upstream portfolio. In this part, we’ll look at the downstream segment’s performance.

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Chevron’s downstream segment

In 4Q17, downstream earnings fell, and its contribution to Chevron’s total earnings fell, too. However, in periods of lower oil prices, the downstream segment contributes a major portion of CVX’s overall earnings. Better margins and higher throughputs in the United States were offset by weaker margins and lower throughputs internationally, leading to a decline in downstream earnings in the quarter.

CVX’s refining margin pointers

Refining margins where Chevron operates are key indicators of Chevron’s margin performance. These zonal margins are Singapore-Dubai 3-1-1-1, the U.S. West Coast (or USWC) Blended 5-3-2, and the U.S. Gulf Coast (or USGC) Maya/Mars 5-3-2.

On a year-over-year basis, margins have fallen in two of the regions in 4Q17. While USWC and Singapore-Dubai margins have declined year-over-year in 4Q17, USGC margins have risen. The biggest fall was in the USWC margin, which fell 8% YoY (year-over-year) to $16.9 per barrel in 4Q17. Similarly, Singapore-Dubai margins fell 2% YoY to $8.1 per barrel in 4Q17. However, USGC margins rose 5% YoY to $17.5 per barrel. Also, in absolute terms, USGC margins stood the tallest.

Quarter-over-quarter, all three regional indicators posted lower margins.

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