CVX 2009 Q1 Earnings

As the economy continues to struggle, consumers are tightening their belts and are only spending on the bare necessities to get through everyday life. Due to those circumstances, the price of oil and natural gas have steadily tumbled over the past year, which has lead to some of the biggest oil companies posting staggering decline in profits and sales.

That turned out to be the case on May 1, with the country’s second largest oil company, Chevron Corp. (CVX) reporting that 1st quarter profits plummeted as a result of the lower energy costs. During the recent period, Chevron recorded net earnings of $1.84B, or $0.92 per share, in sharp contrast to the previous year’s profits of $5.17B, or $2.48 per share. That equates to a decline in earnings of more than 64%.

Included in the company’s results, Chevron benefits from a gain of nearly $400M, or $0.20 per share from the sales of company assets. Meanwhile, the company’s revenues for the quarter plunged from $65.9B a year ago to $36.1B, a decrease in sales of more than 45%.

Analysts within the industry, on average, were looking for Chevron to post quarterly results of $0.81 per share on total revenues of $21.14B, typically excluding special one-time items.

Much of the company’s lowered results are a direct result of the price of oil spending much of 2008 well in the triple-digit price range. Before the collapse in prices, oil companies, including Chevron, were posting record-breaking earnings. A year later, the price of crude has remained constant at, or below, the $50 price range.

Another contributing factor to the decrease in earnings is that consumers have reduced their energy consumption while crude and natural gas inventories have increased as a result of a weakening demand for energy products. Along those lines, Chevron’s average sale price per barrel of oil plummeted 60% year-over-year to $36. Meanwhile, the average selling price of natural gas liquids plunged 45%.

Throughout the company’s operations, Chevron confirmed that income from their explorations and production businesses retreated by more than 75% in the quarter to total $1.27B. Once again, results were weighed down by lower selling prices. Within the U.S., the explorations and production segments took the hardest hits. Last year’s earnings from the domestic unit posted profits of $1.6B, while during the 1st quarter this year, earnings were a putrid $21M.

“Operationally, we had an excellent quarter with oil production and refinery inputs both higher than a year ago and operating expenses lower. However, upstream earnings declined sharply on lower prices for crude oil and natural gas. Downstream profits improved mainly on gains from asset sales, while margins on the sale of refined products recovered only slightly from a depressed level in last year's first quarter,” stated Dave O'Reilly, Chairman and CEO of Chevron.

On a global scale, Chevron’s productivity in oil-related products averaged 2.56 million barrels a day, up 2.3% from last year’s productivity of 2.6 million barrels. Meanwhile, capital and exploratory expenses advanced substantially year-over-year, from $5.1B a year ago to $6.5B, an increase of more than 27%.

As for the company’s chemical business unit, Chevron witnessed income from the segment fall from $43M to $39M, a decrease in earnings of more than 9%. The resulting decline was due in large part to a decline in lower margins, lower volumes, and a severe fall-off in demand for chemicals during the world’s economic crunch.

Despite posting quarterly results below the company’s 1st quarter figures from 2008, investors were set at ease by the quarter’s recent performance, sending shares of CVX into the green by the close of trading. Ending the first trading day in May, Chevron shares added $0.77, or 1.2%, to conclude the session at $66.87 per share. Over the past year, shares of CVX have traded within a range between $55.50 and $104.63 per share.

By BetterTrades