Written by Sabrina Valli and Merinalika Roy
(Reuters) – Chevron Corp on Friday reported second-quarter earnings that missed Wall Street estimates due to industry-wide pressure from lower refining margins and prices, sending its shares down 1.5 percent in premarket trading.
The company had earlier warned that oil production would decline this quarter and that refining would suffer from restarts at two California refineries. Refining margins have been weak globally, hurting other major oil companies such as BP and Shell.
Chevron Pacific Coast Oil Co. (NYSE:) announced that it will move its headquarters from San Ramon, California, where it was founded 145 years ago as Pacific Coast Oil Co., to Houston. The company has been strongly opposed to government regulations on oil production and refining in the state.
Chevron reported earnings of $4.4 billion, or $2.43 per share, in the quarter, compared with $6 billion a year earlier.
The company reported adjusted earnings of $4.7 billion, or $2.55 per share. Wall Street analysts were expecting earnings of $2.93 per share, according to LSEG data.
Profits from pumping oil and gas fell 9.4% from a year earlier. Profits from gasoline and chemicals production fell about 60% to $597 million.
“Despite the recent operational disruption and reduced margins, we remain poised to deliver long-term profitability and cash flow growth,” said CEO Mike Wirth.
Refining margins
Oil refiners made less money selling gasoline in the second quarter after two years of impressive profits and after ramping up production to meet demand that never materialized.
Lower refining margins caused Shell’s profit to fall 19% from the previous quarter to $6.3 billion. Refining margins also limited BP’s earnings, which beat its forecast of $2.8 billion, and contributed to a 6% drop in TotalEnergies’ profit.
Chevron had forecast LNG prices at around $10 per million metric tons, and prices have risen to around $12 on strong demand. The gains could help LNG margins.
The negative results come as the proposed $53 billion takeover of Hess (NYSE:) has been halted.
The company said on Wednesday that an arbitration panel will review the appeal of the deal. Exxon Mobil Exxon Mobil is unlikely to make a decision before the second half of next year. Chief Financial Officer Catherine Michaels told Reuters the company expects a decision on the dispute by September 2025. “I can confirm (the hearing) is at the end of May 2025. There is an expectation of a ruling by September 2025,” she said.
The delay has raised speculation about possible talks between Exxon and Chevron to reach a settlement sooner.
“Given the expected timeline for the arbitration hearing, which is going to be very long, I think there is an incentive for Hess and Chevron to try to offer some sort of sweetener to Exxon to end this issue,” said Frederic Boucher, arbitration risk analyst at Susquehanna Financial Group.
Exxon’s CFO declined to comment on whether the companies were engaged in side talks. Chevron’s shares have underperformed Exxon and oil prices this year as it struggles to close a deal that would give it a stake in a joint venture in Guyana that has discovered more than 30 significant oil discoveries. Chevron is counting on the deal to cement a foothold in Guyana’s lucrative oil reserves and help mitigate risks associated with its struggling oil and gas operations in Australia and Kazakhstan.
California
California’s oil production a century ago was enough to make it the fourth-largest producer of crude in the United States, but big oil companies have begun pulling out of the state amid tighter climate restrictions and depleting oil fields.
Chevron expects to move all corporate jobs to Houston over the next five years. Support jobs for its California operations, which include oil fields and two refineries, will remain in San Ramon.
Chevron said CEO Wirth and Vice Chairman Mark Nelson will move to Houston before the end of 2024.
Chevron currently has approximately 7,000 employees in the Houston area and approximately 2,000 employees in San Ramon.