Chevron’s earnings per share for the second quarter were more than three times higher than last year. The company processed record amounts of fuel at its refineries and gained from much higher oil prices due to the conflict in Iran.
Chevron reported adjusted earnings of $6.06 per share, beating analyst expectations of $5.55 and up from $1.77 last year. Revenue increased 56% to $70.1 billion, above the estimated $62.7 billion. Spot oil prices averaged $104 per barrel, up 28% from the previous quarter.
Higher prices have improved Chevron’s balance sheet, letting the company reduce net debt by about 30%. Capital spending is expected to be near the low end of its forecast, even as production rises. A year after buying Hess, Chevron has achieved cost savings from the deal faster and more significantly than expected, giving it more flexibility to grow production and explore new business areas.
Chief financial officer Eimear Bonner told Barron’s that Chevron is sticking to a careful growth strategy, even though the current market is good for oil producers. She said the energy business goes through cycles, and Chevron’s approach is designed to work well in both high and low price periods, instead of changing plans based on short-term price changes.
Chevron’s shares, which were already up 16% for the month as of Thursday, rose a bit more before trading opened on Friday. Brent crude, the global oil benchmark, was set for a 20% monthly gain and traded just below $88 a barrel early Friday.
Analysts reacted positively to Chevron’s results. Citi said the company’s performance supports the idea that its stock should be valued more like ExxonMobil’s. Chevron currently trades at a significant discount to ExxonMobil based on cash flow, which Citi called unusual since both companies have similar growth potential and strong portfolios. Historically, this would make Chevron look like a better value.
Chevron is also looking at several new growth opportunities that could shape its future. The company is considering a possible deal in Iraq, wants to boost production in Venezuela despite political uncertainty, and has applied for a major shale drilling project in Argentina.
Bank of America said it was glad to see Chevron adding more growth opportunities. A year ago, most expected Chevron would need acquisitions to keep growing, but now its own growth options look much stronger. The firm named Chevron its top choice among oil majors and refiners.
Chevron is also leading many of its competitors in building natural-gas power projects for data centers. This area is expected to get attention on the earnings call, especially after Chevron signed a 20-year power supply deal with Microsoft this quarter.
