10-QPeriod: Q3 FY2016

CHEVRON CORP Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 3, 2016For Securities:CVX

Summary

Chevron Corporation reported its financial results for the third quarter and the first nine months of 2016, reflecting a challenging operating environment characterized by lower commodity prices. For the third quarter, net income attributable to Chevron Corporation was $1.28 billion ($0.68 per diluted share), a decrease from $2.04 billion ($1.09 per diluted share) in the same period of 2015. The nine-month period resulted in a net loss of $912 million ($0.49 per diluted share), a significant decline from a net income of $5.18 billion ($2.76 per diluted share) in the first nine months of 2015. This performance was driven by a substantial drop in upstream earnings, primarily due to lower crude oil and natural gas realizations, which more than offset improvements in downstream segment performance and cost control measures. The company's capital and exploratory expenditures saw a significant reduction, reflecting a strategic response to lower commodity prices. Dividends paid to common shareholders remained substantial, with a slight increase in the quarterly dividend announced. Despite the challenging market conditions, Chevron maintained its strong financial position, though its debt ratio saw an increase. The company continues to focus on managing costs and optimizing its portfolio in anticipation of a recovery in oil and gas prices.

Financial Highlights

46 data points
Beta

Revenue

$30.14B

Net Income

$1.28B

4.3% Net Margin

EPS (Diluted)

$0.68

Total Assets

$259.86B

Cash & Equivalents

$7.35B

Free Cash Flow

$5.31B

Financial Statements
Beta
Revenue$30.14B
SG&A Expenses$1.11B
Operating Expenses$29.03B
Interest Expense$64.00M
Net Income$1.28B
EPS (Basic)$0.68
EPS (Diluted)$0.68
Shares Outstanding (Basic)1.87B
Shares Outstanding (Diluted)1.88B

Key Highlights

  • 1Net income for Q3 2016 was $1.28 billion, down from $2.04 billion in Q3 2015, with diluted EPS at $0.68 versus $1.09.
  • 2The first nine months of 2016 resulted in a net loss of $912 million, a sharp contrast to a net income of $5.18 billion in the same period of 2015.
  • 3Upstream segment earnings significantly decreased due to lower crude oil and natural gas prices and realizations.
  • 4Downstream segment earnings declined in Q3 2016 compared to the prior year, primarily due to lower refined product margins and reduced earnings from equity affiliates.
  • 5Capital expenditures were reduced by approximately 35% for the nine-month period ($17.2 billion in 2016 vs. $25.3 billion in 2015).
  • 6Total debt and capital lease obligations increased to $45.6 billion at September 30, 2016, from $38.5 billion at December 31, 2015, leading to a higher debt ratio.
  • 7The company continued to pay dividends, totaling $6.0 billion for the first nine months of 2016, and announced an increase in its quarterly dividend to $1.08 per share.

Frequently Asked Questions

The substantial net loss of $912 million for the first nine months of 2016, compared to a profit of $5.18 billion in the prior year, was primarily driven by the sharp decline in crude oil and natural gas prices, which severely impacted the Upstream segment's earnings and realizations. Additionally, lower equity affiliate earnings and a decrease in gains on asset sales contributed to the reduced profitability.

Chevron has implemented cost management strategies, including reductions in operating expenses, employee numbers, and capital and exploratory expenditures. For the first nine months of 2016, capital expenditures were reduced by approximately 35% compared to the same period in 2015. Operating, selling, general, and administrative expenses also decreased significantly.

Chevron anticipates that crude oil prices will eventually increase as demand growth and slowing supply growth bring global markets into balance, though the timing remains uncertain. The company is managing its operations and capital program with the expectation of a sustained lower price environment, while also evaluating opportunities for asset disposals and acquisitions to enhance financial performance and value growth.

Yes, Chevron's total debt and capital lease obligations increased to $45.6 billion at September 30, 2016, from $38.5 billion at the end of 2015. Consequently, the debt ratio, which measures total debt as a percentage of total debt plus equity, rose to 23.7% from 20.2%.