Chevron Corp on Friday reported a 38 per cent increase in quarterly profit bolstered by asset sales but plans to expand cost cuts amid falling demand and weak prices for oil and gas.
Global fuel demand has crashed by a third while many people shelter at home for an indefinite period. Major oil companies have largely reported losses in the latest period as an oil glut and coronavirus-related lockdowns sent prices to historic lows.
Chevron beat Wall Street expectations with a $3.6 billion profit, up from $2.6 billion during the same period last year. Results were boosted by $1.6 billion gain, largely from sale of oil and pipeline properties in Azerbaijan.
Cash flow from operations covered its dividend and capital spending, leaving Chevron “in a strong position weather the storm,” said Anish Kapadia of Palissy Advisors.
Shares were down 3 per cent at $89.44 on Friday.
The second-largest U.S. oil producer benefited from higher earnings from its refinery business and increased oil output, offset by weaker prices.
The outlook for a continued oil glut prompted Chevron to further cut its 2020 spending budget to $14 billion, down 30 per cent from its plan before the oil price crash. The percentage cut matches those at bigger rivals.
The cuts are “across the board,” but include additional trims to shale oil projects and deferred spending at a major expansion project in Kazakhstan, Chief Financial Officer Pierre Breber said in an interview.
The company has “pulled expansion down significantly” at its Permian shale unit. It expects to end the year with Permian output about 125,000 bpd below its 600,000 bpd target.
“We will come out of this crisis, but we will come out with inventories pretty full because there’s so much oil and products in storage,” Breber said.
A 68 per cent drop in profit from its U.S. oil business was offset by strong earnings in international oil and gas, which rose 13 per cent on the rise in the U.S. dollar and asset sales. Refinery profits more than tripled to $1.1 billion last quarter.
Chevron held its dividend steady, while Royal Dutch Shell cut its dividend for the first time since World War Two. Equinor also cut its dividend, while BP Plc and Exxon kept their dividends stable.
Oil and gas output rose to 3.24 million barrels per day (bpd), an increase of more than 6 per cent. The company plans to curtail its oil output by as much as 300,000 bpd in May and by up to 400,000 bpd in June, Breber said.
Chevron and Exxon had been racing to reach 1 million barrels per day of production in the Permian basin, the top U.S. shale field, before demand tumbled.
Chevron has sidelined 10 drilling rigs since early March and Exxon has cut 11 in the field since, according to data from research firm Enverus.
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