Chevron Reports Q2 Earnings Miss on Weak Refining Margins

(Reuters) – Chevron(CVX.N) reported second-quarter earnings on Friday that missed Wall Street estimates due to industry-wide pressure from lower refining margins and natural gas prices, sending its shares down 1.5% in premarket trading.

The company earlier had warned oil output this quarter would slip and refining would suffer from turnarounds at two refineries in California. Refining margins have been weak globally, hurting other oil majors like BP and Shell.

Chevron reported earnings of $4.4 billion, or $2.43 per share, in the quarter, compared with $6 billion a year before.

It reported adjusted earnings of $4.7 billion, or $2.55 per share, compared to adjusted earnings of $5.8 billion, or $3.08 per share, in second quarter 2023.

Wall Street analysts expected earnings per share of $2.93, according to LSEG data.

Earnings from pumping oil and gas were down 9.4% from a year earlier. Profit from producing gasoline and chemicals was also down about 60% to $597 million.

“Despite recent operational downtime and softer margins, we remain poised to deliver significant long-term earnings and cash flow growth,” CEO Mike Wirth said.

Prices for oil and gas were mixed in the quarter. The average Brent crude oil price was up about 8% in the quarter while U.S. gas prices slipped 10%, both versus a year ago.

REFINING MARGINS

Oil refiners made less money selling gasoline in the second quarter after two years of stellar profits and after ramping up production for demand that never materialized.

TotalEnergies Q2 earnings fall 6% on weaker demandTotalEnergies Q2 earnings fall 6% on weaker demand

Lower refining margins drove Shell’s profits down 19% from the previous quarter to $6.3 billion. Refining margins also limited BP forecast-beating $2.8 billion profit and contributed to TotalEnergies’s (TTEF.PA) 6% earnings drop.

Chevron had predicted liquefied natural gas (LNG) prices of about $10 per million metric tons and they have been run higher, at about $12, on strong demand. The gains could help its LNG margins.

DEAL DELAY

The downbeat results come as its proposed $53 billion acquisition of oil producer Hess (HES.N) has been stalled.

On Wednesday, the company said an arbitration panel that will evaluate a challenge to the deal from Exxon Mobil (XOM.N) likely will not have a decision until the second half of next year.

Exxon expects a decision on the dispute by September 2025, Chief Financial Officer Kathryn Mikell told Reuters.

“I can confirm (the hearing) at that end of May 2025. And there is an expectation of a ruling by September of 2025”, she said.

Chevron shares have underperformed both Exxon and the S&P 500 index this year as it struggles to conclude the deal, which would give it a stake in a Guyana joint venture that has found more than 30 significant oil discoveries.

Chevron is counting on this deal to establish a foothold in Guyana’s lucrative oil reserves and help mitigate risks associated with its performance-challenged oil and gas operations in Australia and Kazakhstan.