Chevron shrugged off a crude price plummet in the third quarter, posting a 13 percent increase in profits as its U.S. refineries took advantage of cheaper feedstock and better reliability.
The second-largest U.S. oil company pumped less and sold its oil for a much lower price as oil prices plunged more than 20 percent in recent months, but cheaper crude also helped Chevron fetch bigger profits on its refined products.
“We want to maintain a strong balance sheet precisely for times like this,” Pat Yarrington, vice president and chief financial officer, said in a call with investors.
The company wasn’t shaken by falling prices, saying it has no plans to pull back from some of its priority projects, including two massive liquefied natural gas developments in Australia that have been plagued by rising material and labor costs. Those projects have been sucking up big chunks of Chevron’s cash, but once they go online, they’ll begin to generate revenue for the company, Yarrington said.
“By necessity, we take a long-term view of prices, because our investments last for decades,” Yarrington said in the call. “We continue to believe global demand for oil and natural gas will grow, while existing sources of supply will inevitably decline.”
While other companies have said they would consider pulling back from the Permian Basin, Yarrington highlighted development in that region as one of Chevron’s bright spots.
“Permian development, for example, remains quite attractive even at lower prices,” she said.
Like all big oil companies, Chevron is weighing the fall price of crude as it pieces together its business plan for next year.
Yarrington said Chevron would consider cutting exploration in a “cash-flow-constrained” environment, but the company tests its investments against different oil price scenarios, and crude is currently trading within the low-cost range.
Chevron on Friday posted earnings of $5.59 billion, or $2.95 per share, during the three-month period ending Sept. 30. That’s up from $4.95 billion, or $2.57 cents per share, during the same period last year.
Chevron’s U.S. refining and downstream operations posted earnings that more than tripled from last year, thanks to the widening spread between the cost of crude and refined products and lower operating expenses.
The company’s refinery in El Segundo, California reported less downtime due to scheduled maintenance, allowing Chevron to process more crude.
Refined product sales, particularly of jet fuel, gas oil and kerosene, ticked up 2 percent to 1.22 million barrels per day.
Chevron’s strong refining performance helped make up for the suffering in the company’s upstream sector. The company also benefited from selling off some some of its assets as part of three-year divestment program.
Global production fell 20,000 barrels per day to 2.57 million bpd. In the U.S., the average sales price per barrel of crude and natural gas liquids fell to $87 per barrel from $97 during the same time last year.
Although the San Ramon, California-based multinational corporation has been ramping up production in Argentina, Brazil, Nigeria and expanding its reach the Marcellus Shale in Pennsylvania and the Permian Basin in West Texas and New Mexico, those increases were offset by normal field declines elsewhere.
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