By Shariq Khan, Sheila Dang and Seher Dareen
(Reuters) -Chevron reported fourth-quarter earnings below Wall Street estimates on Friday as weak margins dragged its refining business into a loss for the first time since 2020.
CEO Mike Wirth told Reuters the post-pandemic surge in fuel margins had run its course, and the downtrend is set to continue this year.
The second-largest U.S. oil producer, which on Friday became one of the first companies to heed U.S. President Donald Trump’s executive order renaming the Gulf of Mexico the “Gulf of America,” posted adjusted earnings per share of $2.06.
That was below Wall Street’s $2.11 estimate, pushing Chevron shares down over 4% to a three-week low of $148.68.
Profit on fuel sales tumbled across the industry last year, as a post-pandemic demand surge faded and economic activity faltered in the United States and China, the two largest oil consumers.
Chevron’s downstream business lost $248 million in the fourth quarter of 2024, compared with a profit of $1.15 billion in the same period a year ago.
Profit from the company’s oil and gas exploration and production unit rose to $4.3 billion from $1.59 billion a year ago when the figure included charges, but the U.S. business missed consensus estimates, RBC analysts said in a note.
“A relatively soft set of numbers,” RBC analysts wrote of Chevron’s results. “With the strong run CVX has had relative to peers over recent months, we expect these results to be taken as disappointing,” they said.
Refining margins softened in both U.S. and international markets, but weak jet fuel demand aggravated troubles for the Houston-based company’s domestic business. U.S. fuel sales fell 3% year-over-year, Chevron said.
“This trend we have seen of margins softening through 2024 is something you can expect to continue to see, to extend into 2025,” he said.
Weak refining margins and lower oil prices during the fourth quarter also weighed on Exxon Mobil’s earnings, but the top U.S. oil producer beat analyst estimates. Exxon shares were down 1.6%.
Chevron remains locked in a bitter arbitration battle with Exxon over its proposed $53-billion takeover of Hess, which owns a 30% stake in Exxon’s Guyana holdings.
Previous discussions to attempt to settle the dispute have ended and Chevron is focused on the arbitration, Wirth said.
RECORD PERMIAN OUTPUT
While refining struggled, Chevron’s oil production held relatively flat in the fourth quarter at 3.35 million barrels of oil equivalent per day, compared with 3.39 million boepd a year ago.
Production from the Permian Basin of Texas and New Mexico grew 14% year-over-year to a record 992,000 boepd, bringing the company within touching distance of a target to reach 1 million boepd in the top U.S. oilfield this year, Wirth said.
Future growth will come partly from the Gulf of America, as the company described the ocean basin known internationally as the Gulf of Mexico.
Chevron expects its global output to grow 6% to 8% this year, and 3% to 6% in 2026, assuming Brent crude oil prices of around $70 a barrel, the company said. Brent currently trades around $77.
The company hiked its quarterly dividend 5% to $1.71 per share and reaffirmed expectations of adding $10 billion in free cash flow over the next two years.
Chevron also pledged to continue buying back $10 billion to $20 billion of its shares each year, depending on market conditions.
(Reporting by Shariq Khan in New York and Sheila Dang in Houston, Seher Dareen and Arunima Kumar in Bengaluru; Editing by Muralikumar Anantharaman, Saumyadeb Chakrabarty and Rod Nickel)
