5 Mar

Have Chevron’s Segmental Dynamics Changed?

WRITTEN BY Maitali Ramkumar

Chevron’s segmental dynamics: Upstream

Chevron’s (CVX) earnings improved in 4Q17 compared to 4Q16. Its adjusted upstream segment earnings rose from $924 million in 4Q16 to $1,975 million in 4Q17. Upstream earnings rose due to higher hydrocarbon production, coupled with better oil prices.

Average crude oil realizations in the United States rose from $44 per barrel in 4Q16 to $54 per barrel in 4Q17. Similarly, in the international region, crude oil realizations rose. Overall, Chevron’s upstream production grew from 2.67 million barrels of oil equivalent per day (or MM boepd) in 4Q16 to 2.74 MM boepd in 4Q17.

Have Chevron’s Segmental Dynamics Changed?

Downstream earnings fall

Chevron’s adjusted downstream earnings fell 40% YoY to $181 million in 4Q17, mainly due to lower throughputs and a weaker refining margin in international regions, partly offset higher throughput and better margins in the United States.

Chevron’s refinery throughput rose in the United States from 721,000 barrels per day (or MBD) in 4Q16 to 834 MBD in 4Q17. This rise was due to the absence of turnaround activities in the Richmond refinery in 4Q17, partly offset by the impact of Hurricane Nate at the Pascagoula refinery and turnaround activities at the El Segundo refinery in 4Q17. However, international downstream throughputs fell from 801 MBD in 4Q16 to 761 MBD in 4Q17. This fall was due to the impact of the sale of Chevron’s Canadian assets.

Overall adjusted earnings

Overall adjusted earnings rose from $0.4 billion in 4Q16 to $1.4 billion in 4Q17. The contribution of the upstream segment to overall earnings has risen from 4Q16 to 4Q17. On the other hand, the downstream earnings contribution fell. Higher oil prices led to a change in segmental dynamics for the company.

Chevron’s peers’ performance

Chevron’s peer Royal Dutch Shell’s (RDS.A) Upstream segment earnings rose from $54 million in 4Q16 to $1.7 billion in 4Q17 on an adjusted basis. Also, ExxonMobil’s (XOM) adjusted upstream earnings increased from $1493 million in 4Q16 to $2518 million 4Q17. Similarly, BP’s (BP) upstream segment—which posted URC (underlying replacement costs) EBIT (earnings before interest and tax) of $0.4 billion in 4Q16—rose to $2.2 billion in 4Q17.

Next in this series, we’ll review Chevron’s upstream portfolio.

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