10-QPeriod: Q3 FY2014

CHEVRON CORP Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 7, 2014For Securities:CVX

Summary

Chevron Corporation's third quarter and nine-month 2014 financial results indicate a mixed performance driven by upstream and downstream segment dynamics. Net income attributable to Chevron Corporation for the third quarter of 2014 was $5.6 billion, an increase from $5.0 billion in the same period of 2013. However, for the nine months ended September 30, 2014, net income decreased to $15.8 billion from $16.5 billion in the prior year. This contrast highlights the quarter-over-quarter improvement while signaling a year-to-date decline, primarily influenced by commodity prices and operational costs. The Upstream segment experienced a year-over-year decline in earnings for both the quarter and the nine-month period, attributed to lower crude oil realizations and higher depreciation expenses. Conversely, the Downstream segment showed significant improvement, with third-quarter earnings rising substantially due to stronger refining margins and gains from asset sales. The company maintained a robust operational focus, with significant capital expenditures primarily directed towards upstream projects. Cash flow from operations remained strong, providing ample resources for dividends and share repurchases, though total debt saw an increase.

Financial Highlights

44 data points
Beta

Revenue

$54.68B

Net Income

$5.59B

10.2% Net Margin

EPS (Diluted)

$2.95

Total Assets

$265.43B

Cash & Equivalents

$14.21B

Free Cash Flow

$8.68B

Financial Statements
Beta
Revenue$54.68B
SG&A Expenses$1.12B
Operating Expenses$45.82B
Net Income$5.59B
EPS (Basic)$2.97
EPS (Diluted)$2.95
Shares Outstanding (Basic)1.88B
Shares Outstanding (Diluted)1.90B

Key Highlights

  • 1Third-quarter net income increased year-over-year to $5.6 billion ($2.95 per diluted share) from $5.0 billion ($2.57 per diluted share) in Q3 2013, driven by strong downstream performance.
  • 2Nine-month net income decreased year-over-year to $15.8 billion ($8.29 per diluted share) from $16.5 billion ($8.52 per diluted share) in the first nine months of 2013.
  • 3Upstream segment earnings declined in both the quarter ($4.6 billion vs. $5.1 billion) and nine-month period ($14.2 billion vs. $16.0 billion) due to lower crude oil realizations and higher expenses.
  • 4Downstream segment earnings surged in the third quarter to $1.4 billion from $0.4 billion in Q3 2013 and for the nine-month period to $2.8 billion from $1.8 billion, benefiting from higher refining margins and asset sale gains.
  • 5Capital expenditures remained substantial, with $29.0 billion in the first nine months of 2014, primarily focused on Upstream projects.
  • 6The company continued its return of capital to shareholders through dividends ($5.9 billion in the first nine months of 2014) and share repurchases ($1.25 billion in Q3 2014).
  • 7Total debt and capital lease obligations increased to $25.7 billion at September 30, 2014, from $20.4 billion at year-end 2013, though the debt ratio remained manageable.

Frequently Asked Questions

Chevron's Q3 2014 earnings increased primarily due to a significant improvement in the Downstream segment, which saw higher refining margins and gains from asset sales. While the Upstream segment's earnings decreased due to lower crude oil realizations and higher depreciation, the strong performance in the Downstream segment more than offset these declines, leading to an overall increase in net income attributable to Chevron Corporation.

The Upstream segment's earnings for the first nine months of 2014 were lower than in the prior year. This was mainly due to higher depreciation, operating, and exploration expenses, coupled with lower crude oil realizations and sales volumes. While there were higher gains from asset sales, they were not sufficient to fully offset these negative factors.

Chevron's earnings are heavily influenced by crude oil and natural gas prices, which are subject to global economic conditions, supply and demand, geopolitical events, and production levels by organizations like OPEC. The report notes that Brent crude prices, which significantly impact the company's upstream earnings, had been declining towards the end of Q3 2014 due to factors like a softening global economic recovery and strong U.S. production. Management actively monitors these developments and adjusts operational plans and capital spending to manage risks and maintain financial flexibility.

Chevron continued to invest heavily in its business, with capital expenditures totaling $29.0 billion in the first nine months of 2014, predominantly in upstream projects. The company demonstrated a commitment to returning capital to shareholders by paying $5.9 billion in dividends and repurchasing $1.25 billion of its common stock during the third quarter of 2014. The company expects to continue share repurchases within a range of $500 million to $2 billion per quarter.