10-QPeriod: Q2 FY2017

CHEVRON CORP Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 3, 2017For Securities:CVX

Summary

Chevron Corporation reported a significant turnaround in its financial performance for the first half of 2017 compared to the same period in 2016, primarily driven by a rebound in oil prices. For the six months ended June 30, 2017, Chevron posted a net income of $4.13 billion, a substantial improvement from a net loss of $2.17 billion in the prior year. This shift was largely fueled by a recovery in the Upstream segment, which swung from a significant loss to a strong profit, benefitting from higher crude oil and natural gas realizations. While the Downstream segment showed slightly lower earnings year-over-year due to the absence of asset sale gains, overall profitability was robust. The company also managed its capital expenditures, reducing them significantly from the previous year, while maintaining dividend payments and a solid liquidity position. Investors should note the strong recovery in profitability, indicating a healthier operating environment. However, the company's earnings remain sensitive to oil price volatility. The reduction in capital expenditures suggests a cautious approach to investment amidst market uncertainties. The company continues to manage its portfolio through asset sales, with proceeds contributing to overall financial health.

Financial Statements
Beta
Revenue$32.88B
Cost of Revenue$18.32B
Gross Profit$14.55B
SG&A Expenses$927.00M
Operating Expenses$32.53B
Interest Expense$48.00M
Net Income$1.45B
EPS (Basic)$0.77
EPS (Diluted)$0.77
Shares Outstanding (Basic)1.88B
Shares Outstanding (Diluted)1.89B

Key Highlights

  • 1Net income attributable to Chevron Corporation was $1.45 billion for Q2 2017, a significant improvement from a net loss of $1.47 billion in Q2 2016. For the first six months of 2017, net income was $4.13 billion, compared to a net loss of $2.17 billion in the same period of 2016.
  • 2Upstream segment earnings rebounded strongly, showing $853 million in Q2 2017 and $2.37 billion for the first six months, a dramatic improvement from losses of $2.46 billion and $3.92 billion, respectively, in the prior year. This was driven by higher crude oil and natural gas realizations and lower impairment charges.
  • 3Downstream segment earnings remained relatively stable, with $1.20 billion in Q2 2017 and $2.12 billion for the first six months, slightly down year-over-year for the quarter but up for the six-month period, primarily due to refined product margins.
  • 4Total revenues and other income increased by approximately 17.4% for the quarter ($34.48 billion vs $29.28 billion) and 28.6% for the six months ($67.90 billion vs $52.84 billion), reflecting higher commodity prices and sales volumes.
  • 5Capital and exploratory expenditures decreased significantly, from $10.04 billion in the first six months of 2016 to $6.54 billion in the first six months of 2017.
  • 6Cash provided by operating activities more than doubled, increasing from $3.67 billion in the first six months of 2016 to $8.92 billion in the first six months of 2017.
  • 7Dividends paid to common shareholders remained substantial, totaling $4.06 billion for the first six months of 2017, consistent with the prior year's $4.00 billion.

Frequently Asked Questions

The primary driver is the recovery in crude oil and natural gas prices. Higher commodity prices led to a significant rebound in the Upstream segment's profitability, swinging from a substantial loss in 2016 to a profit in 2017. This, combined with reduced impairment charges, significantly boosted overall net income.

The Upstream segment showed a dramatic recovery, turning a large loss into a significant profit due to higher commodity prices. The Downstream segment performed more consistently, with slight year-over-year decreases in earnings for the quarter but an increase for the six-month period, driven by refined product margins, though it was impacted by the absence of asset sale gains.

Chevron significantly reduced its capital and exploratory expenditures in the first half of 2017 compared to the prior year, indicating a more cautious investment strategy. Despite these reductions, the company continued to pay substantial dividends to its shareholders, demonstrating a commitment to returning capital to investors.

Yes, Chevron is involved in several significant legal matters, most notably the ongoing litigation related to environmental issues in Ecuador, which involves substantial potential damages. While the company believes this lawsuit lacks merit and is vigorously defending itself, its ultimate outcome remains uncertain. Other contingencies include environmental matters and tax disputes, which are detailed in the filing.