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How Chevron’s Earnings Mix Changed in Q1

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Change in earnings mix

Chevron’s (CVX) adjusted earnings fell from $3.6 billion in the first quarter of 2018 to $2.8 billion in the first quarter of 2019. Its earnings mix also changed radically.

Chevron’s Upstream segment, which contributed 92% to its overall adjusted earnings in the first quarter of 2018, added another 118% in the first quarter of 2019. Chevron’s adjusted Upstream earnings fell 2% over the first quarter of 2018 to $3.3 billion in the first quarter of 2019 due to lower realizations partly offset by higher volumes. Chevron’s production grew due to the ramp-up of volumes at Wheatstone and in the Permian Basin. Chevron’s production rose 7% YoY to 3.04 million barrels of oil equivalent per day in the first quarter of 2019.

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Despite the fall in its earnings, the Upstream segment’s contribution to the company’s total earnings rose due to a decline in its Downstream contributions. Chevron’s Downstream segment’s contribution fell from 20% in the first quarter of 2018 to 8% in the first quarter of 2019. Chevron’s adjusted Downstream earnings also fell from $0.7 billion in the first quarter of 2018 to $0.2 billion in the first quarter of 2019 mainly due to lower Downstream and Chemicals margins.

Other expenses negatively affected CVX’s total earnings by 26% in the first quarter of 2019 compared to 12% in the first quarter of 2018.

Overall

It’s evident that the fall in the company’s Downstream margin has led to a decline in its Downstream earnings, which has altered its earnings mix. This development also points to the fact that Chevron’s Upstream earnings supported its overall earnings in weaker downstream conditions—a favorable scenario pointing to the strength in the company’s integrated earnings model.

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