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Chemical and energy producer Chevron delivered a production “gusher” in the first quarter as its global output rose 15% to nearly 3.9 million barrels of oil equivalent per day (BOE/d). The production increase coincided with a sharp rise in oil prices, a combination that typically supports higher profits. For Chevron, however, earnings declined during the quarter.
Chevron reported nearly $2.8 billion, or $1.41 per share, of adjusted earnings in the first quarter. This compares with $3 billion in the fourth quarter and $3.8 billion in the year-ago period. The decline occurred despite Brent oil averaging $81 per barrel in the first quarter, up from $64 in the fourth quarter and $76 in the year-ago period.
While production increased 15% year over year, Chevron’s output was lower than the more than 4 million BOE/d it produced in the fourth quarter. The company attributed the sequential decline to lower production in the Middle East (including Israel and the partitioned zone between Saudi Arabia and Kuwait) and some downtime at an affiliate in Kazakhstan. This reduced volume limited Chevron’s ability to fully benefit from higher oil prices.
Chevron also cited $2.9 billion in unfavorable timing effects during the quarter. These effects included timing mismatches in recognizing earnings on financial derivatives before the physical delivery of the associated oil and gas production. The company said that, without these unfavorable impacts, earnings would have improved in the period.
Despite the headwinds affecting reported earnings, Chevron’s underlying operations performed well.
Chevron also reported progress on its long-term growth strategy, including multiple project updates and agreements:
Certain war-driven headwinds and the timing issues that affected results in the first quarter are expected to ease as supplies normalize and timing mismatches reverse. Meanwhile, Chevron’s underlying operations continued to show strength, supported by production growth and record refining throughput.
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