Chevron Corp. posted the lowest profit in more than a decade after low energy prices prompted the company to write down the value of its oil and gas fields.
Net income during the second quarter fell to $571 million, or 30 cents a share, from $5.67 billion, or $2.98, a year earlier, San Ramon, California-based Chevron said in a statement July 31. Excluding one-time gains and losses, the per-share result was well below the $1.16 average of 20 analysts’ estimates compiled by Bloomberg.
Production was 2.60 million barrels per day for second-quarter 2015, up about 2% from the same period last year. The increase was attributed to production growth in the United States, Bangladesh and Argentina, Chevron said in a news release. In addition, “production entitlement effects in several locations, and lower maintenance-related downtime, primarily reflecting the absence of a major turnaround at Tengizchevroil in Kazakhstan” added to output totals, offsetting normal field declines and asset sales.
However, Brent crude, the benchmark for most international oil sales, lost 42% of its value compared to the second- quarter of 2014 amid a war of attrition between U.S. shale drillers and the Organization of Petroleum Exporting Countries. The price averaged $63.50 a barrel during the quarter, the lowest for that time of year since 2009.
Chevron’s international upstream operations incurred a loss of $1.18 billion, compared to earnings of $4.21 billion from a year earlier. U.S. upstream operations lost $1.04 billion, compared to earnings of $1.05 billion from a year earlier, the company said in the release.
As the oil market rout deepened this year, Chevron Chairman and CEO John Watson has cut staff, halted share buybacks, quit shale exploration in Poland and Australia, and pledged to auction off $15 billion in assets around the world. The company said Tuesday it’s eliminating 1,500 jobs, or about 2.3% of its global staff, to curb spending by about $1 billion.
Watson’s goal is to shield the company’s 4.7% dividend yield from declining cash flow, even as he seeks to add enough new wells to lift the company’s overall output by 20% by the end of 2017.
Chevron is set to outspend bigger rival Exxon this year by at least $1 billion as mega-projects including the $54 billion Gorgon gas-export development in Australia near completion.
Every $1 change in Brent prices adds or subtracts $325 million to $350 million to Chevron’s cash flow. The company is more sensitive to crude fluctuations than its largest U.S. competitors because 67% of Chevron’s output is oil, compared to 54% at Exxon and 48% at ConocoPhillips.
Hart Energy staff contributed to this report.
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