Chevron Corporation (NYSE:CVX) announced that 1Q earnings declined 43% due to sharp plunge in crude oil prices. However, the outperformance in its refining division helped it to post better than expected results. The company has been working to enhance its oil-and-gas output and in the recent quarter reported daily oil-equivalent production of 2.68 million barrels, up from 2.59 million barrels from the same period a year ago.
Last week, Chevron’s peer Exxon Mobil Corporation (NYSE:XOM) also announced a sharp decline in profit surpassing analysts’ estimates. Both the companies have opted for lower spending as the sharp decline in oil prices eroded billions of dollars from cash flow. Also, due to the setback in performance, Chevron was left with no other option but to stop repurchasing of its shares.
Chevron disclosed that it is looking for new project approvals and reducing costs in order to boost its performance. In the last quarter, capital spending declined to $8.6 billion from $9.4 billion in the same quarter a year ago. In an effort to reduce costs, the management continues to press Chevron suppliers on cost, and have successfully negotiated savings of over $900 million in this year.
Chevron Corporation (NYSE:CVX) stated that its bottom line is better protected against sharp oil decline, compared to other energy producers. It is due to the fact that the company generates revenue from refining crude into diesel and gasoline. Global oil prices have declined more than 40% in last few months and the lower prices has helped refinery segment to expand profit margins.
In the quarter, earnings from downstream division surged to $1.42 billion from $710 million in the same quarter a year ago. Due to lower crude costs, the company’s downstream performance was amongst the best performance recorded in past several years. However, earnings from upstream division declined to $1.56 billion from $4.31 billion.