Higher commodity prices, lower spending and improved efficiency made the third quarter the most profitable one for Chevron in the past eight years, company executives told a quarterly earnings call.
The US supermajor reported earnings of $6.1 billion for the third quarter, compared with a net loss of $211 million in the third quarter of 2020. More than $5.1 billion of that profit came from the company’s upstream segment.
“Strong operating cash flow enabled us to deliver on our financial priorities, including the resumption of share repurchases,” chief financial officer Pierre Breber said.
Breber said Chevron’s focus on capital efficiency paid off with record free cash flow during the third quarter.
“Free cash flow was higher than the strongest quarters in 2008 and 2011, when oil prices were well over $100 per barrel,” he said.
Capital spending guidance lowered
Chevron said it is reducing its capital expenditures guidance for this year from $13 billion to $12 billion, even with the expectation of higher spending in the fourth quarter.
Company executives said the effects of Hurricane Ida, the Covid Delta variant and improved efficiencies in the Permian basin were all factors in the reduction.
“I would think from the original $14 billion budget ... about half you can think of as [project] deferrals and half I would say is capital efficiency and cost savings where we’re getting the same results,” Breber said. “We’ve continued to see continued capital efficiency in the Permian basin and across the portfolio."
'Supply and demand 'out of sync'
When asked if Chevron would consider increasing natural gas production due to high prices and increased demand in Europe and the US, Breber indicated the company had no plans to change its current approach.
“Seeing demand and supply a little bit out of sync is something that we've seen in the past and we expect that markets will work," he said.
"We're seeing a commodity pricing right now and we expect markets to rebalance over time. There's not much in the short term that we can really do to increase supply," Breber said.
"We have position in the Haynesville [shale] and we could increase activity there, but that'll have a modest impact on a company of our size.”
Nor have higher oil and gas prices led Chevron to adjust capital expenditure plans, with Breber saying the company would stick to keeping spending between $15 billion and $17 billion per year through 2025.
“I think we'll announce our 2022 budget in December like we normally do. It'll be within the guidance.
"I think it's fair to say it'll be towards the low end of the guidance,” he said.