By Sabrina Valle and Mrinalika Roy
(Reuters) – Oil giant Chevron Corp beat estimates for first-quarter profit on Friday as higher U.S. production levels helped offset the impact of weak natural gas prices and fuel margins.
The second-largest U.S. oil producer posted a profit of $5.5 billion in the quarter ended March 31, down from $6.57 billion, or $3.46 a share, a year earlier. Results beat consensus by 2% as recent acquisitions boosted oil and gas volumes.
Chevron and Exxon Mobil, whose first-quarter results fell short of Wall Street consensus estimates, are feeling the pressure of weak energy prices and fuel margins that have cooled over the past year. An oversupply of natural gas and a warmer than expected winter led to a sharp decline in natural gas prices and reduced earnings.
“U.S. production increased 35% compared to last year and we continued to achieve key project milestones,” CEO Mike Wirth said in a statement.
Chevron said results were supported by higher production from the acquisition of PDC Energy, Inc. and continued strong execution in the Permian and Denver-Julesburg (DJ) basins.
Shares fell 1.4% to $163.35 in premarket trading.
Chevron said first-quarter oil and gas production rose 12% to 3.34 million barrels of oil equivalent per day (boepd).
Oil and gas production revenue was $5.24 billion, up from $5.16 billion in the same period last year. But profits from the production of gasoline and chemicals fell sharply to $783 million from $1.8 billion a year ago. The refinery suffered from weaker margins and higher operating costs, the company said.
Chevron reported first-quarter adjusted earnings per share of $2.93, beating analysts’ consensus estimate of $2.87.
GUYANA
Late last year, Chevron offered to buy Hess Corp for $53 billion to gain a foothold in oil-rich Guyana’s lucrative offshore fields. However, the deal was stalled by regulatory scrutiny and challenged by Exxon Mobil, which claims the right to Hess’ assets in Guyana. Exxon and partners want to double production capacity to 1.3 million barrels of oil equivalent per day (boepd) by the end of 2027.
Chevron said “the merger with Hess is moving forward” and plans to confirm broad compliance with the Federal Trade Commission’s second request in the coming weeks.
“We remain confident that there is no right of first refusal for this transaction and expect this to be confirmed in arbitration,” it said.
Management will provide additional details on a conference call at 11:00 a.m. ET, where investors will be looking for guidance for the coming year and an update on the arbitration process
Chevron shares have underperformed rival Exxon by about 10 percentage points so far this year as its planned takeover of Hess comes into question.
(Reporting by Sabrina Valle in Houston and Mrinalika Roy in Bengaluru; Editing by Anil D’Silva and Chizu Nomiyama)