Inside Chevron’s Shocking $1.47 Billion Q2 Loss

chevron-cvx-logoIntegrated oil giant Chevron Corporation posted a surprise Q2 loss, marking the third straight losing quarter, as the company continues to adjust to the reality of sustained lower oil prices.

Adjusting to a Lower Oil Price World

The San Ramon, CA-based company reported a second quarter net loss of $1.47 billion, or -78 cents per share, compared with a profit of $571 million, or 30 cents a per share, in the year-ago period. Revenue plunged 27% from last year to $29.28 billion.

The loss surprised Wall Street analysts, who on average expected a profit of 32 cents per share. On a positive note, CVX’s revenue did beat estimates for $28.54 billion.

Despite another weak quarter, CEO John Watson was upbeat about Chevron’s future. From the press release:

“The second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world,” said Chairman and CEO John Watson. “In our upstream business, we recorded impairment and other charges on certain assets where revenue from expected oil and gas production is expected to be insufficient to recover costs. Our downstream business continued to perform well.”

“We continue to make progress towards our goal of getting cash balanced,” Watson added. “Our operating expenses and capital spending were reduced over $6 billion from the first six months of 2015.”

Upstream Operations Hit the Hardest

Chevron is an integrated oil company, meaning it has operations in both upstream (exploration and drilling, or finding oil sites and extracting it from the earth) and downstream (refining raw oil to usable crude). Both segments have been hit hard by the pullback in oil prices, but upstream has performed much worse.

The upstream unit took a $2.46 billion loss in the latest quarter, compared with a $2.22 billion loss in the same period last year. Meanwhile, downstream operations saw a profit of $1.28 billion. That total declined a whopping 57% from Q2 2015.

Considering how low oil prices are, and how late Chevron has adjusted to changing market conditions, perhaps analysts shouldn’t have been so surprised by the latest results.

Chevron Corporation (NYSE:CVX) shares are holding up relatively well this morning, however. CVX was off $1.01 (-0.99%) to $100.78 in early trading. And despite the downturn in oil prices and string of operating losses, Chevron shares have gained nearly 12% year-to-date.


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