Analyst Note| Allen Good, CFA |
Chevron reported first quarter earnings that fell just short of market expectations but still increased significantly from the year before thanks to higher commodity prices. Adjusted earnings increased to $6.3 billion from $1.4 million the year before. Upstream earnings were responsible for the improvement demonstrating Chevron’s leverage to oil and gas prices, increasing to $6.9 billion from $2.4 billion the year before even as production slipped to 3,060 mboed from 3,121 mboed the year before, largely on contract expirations. However, Permian production grew to a record 692 mboed during the quarter and the company increased its 2022 guidance to 700-750 mboed, implying growth of 15% from 2021. Downstream earnings improved to $331 million from $5 million a year ago but remain relatively weak due to losses in the international segment from higher expenses and lower margins. Timing effects related to a rising price market were also responsible for the weaker performance, but should be made up in subsequent quarters.