CVX 2009 Q2 Earnings

Before the sound of the opening bell on July 31, the second largest U.S. oil company, Chevron Corp. (CVX), confirmed that profits during the 2Q plummeted, in large part the steep decline in crude prices, as well as weakened demand in gasoline.

For the recent period, Chevron recorded net earnings of $1.75B, or $0.87 per share, in sharp contrast from the previous year’s 2Q income of $5.98B, or $2.90 per share, a decrease in profits of nearly 71%. Net income was greatly affected by a weakened dollar, resulting in $453M in reduced earnings. In the year before, earnings benefited from a stronger greenback, resulting in a $126M gain.

Revenues, in the meantime, suffered as well, falling from $83B to $40.2B, a drop in sales of almost 52%. Within the industry, analysts were looking for the oil company to post quarterly earnings of $0.95 per share with revenues coming in at $33.4B.

Chairman and CEO at Chevron, Dave O’Reilly commented on the company’s quarterly performance, "The demand for refined products remained generally weak."

Looking further into Chevron’s report, earnings from the company’s upstream exploration and production plunged more than 79% to $1.52B, on lowered prices for crude and natural gas. Additionally, U.S. upstream earnings slipped to $273M, down remarkably from last year’s totals of $2.19B.

Chevron announced that during the first half of the year, the company increased their capital and exploratory procedures, spending $11.4B, up nearly 11% from the previous year’s six-month expenditures of $10.3B in 2008.

O’Reilly added, "The increase was driven by project start-ups since last year's second quarter and the impact of lower prices on cost-recovery and variable-royalty volumes in certain production contracts outside the United States."

Concluding the quarter, the price for crude averaged just under $60 a barrel. Although that price sits nearly 40% above the 1Q’s average price of $43 a barrel, the company’s bottom-line was also affected by natural gas prices trading near seven-year lows. In the 2Q of 2008, the average price obtained from crude and natural gas was $110. In the current quarter, that figure dropped 52% to $53 per barrel.

As for the company’s downstream operations, which include marketing, transportation and refining, Chevron posted a loss of $95M. During the same quarter a year ago, the company booked a loss of $682M. Meanwhile, worldwide crude production advanced by 130K barrels per day to 2.67M barrels.

The CEO further remarked, "Although our downstream results were better than a year ago, the demand for refined products remained generally weak. Sales margins in this year's second quarter were narrow, and our U.S. downstream business operated at a loss."

Through the first two quarters of the year, Chevron posted net income of $3.58B, or $1.79 per share, well below last year’s six-month totals of $11.14B, or $5.38 per share, a drop in profits of more than 67% year-over-year.

Revenues, during the same period, plunged from $148.94B to $76.34B, a steep decline in sales of almost 49%.

At the end of the July 31 trading session, shares of CVX added 2.6%, or $1.77, to conclude the day at $69.47 per share. Since the start of the 2009 trading year, shares of Chevron have slipped 5.3% in market value, compared to a nearly 3% increase for the Chicago Board Options Exchange index of oil stocks (^OIX).

During the course of a year, Chevron’s stock has traded as high as $89.75 per share, and as low as $55.50 per share.

By BetterTrades