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Chevron Corporation (NYSE: CVX) reported earnings of $4.4 billion for the second quarter of 2024, equating to $2.43 per diluted share ($2.55 adjusted eps). This marks a notable decline from the $6.0 billion or $3.20 per diluted share reported in the same quarter of 2023. Adjusted earnings, which exclude significant non-operational items and foreign currency effects, were $4.7 billion or $2.55 per share, compared to $5.8 billion or $3.08 per share in the previous year. The company attributed part of this decline to unfavorable foreign currency effects, which reduced earnings by $243 million.Despite the drop in earnings, Chevron achieved record production levels in the Permian Basin and saw an 11 percent increase in worldwide production compared to the same period last year. The company also returned $6 billion to shareholders through dividends and share repurchases. This continues a trend of significant shareholder returns, with over $50 billion distributed over the past two years. Chevron’s CEO, Mike Wirth, emphasized the company’s strong production and exploration achievements, including new agreements in Namibia, Brazil, Equatorial Guinea, and Asngola.

Chevron’s Q2 EPS of $2.43 Fails to Meet Expectations

Chevron’s actual earnings per share (EPS) of $2.55 fell short of the market expectations of $2.94. The company’s reported revenue of $51.18 billion exceeds expectations of $48.68 billion.The shortfall in EPS can be attributed to several factors, including lower margins on refined product sales and the absence of favorable tax items that benefited the company in the previous year. Additionally, higher depreciation, depletion, and amortization expenses, along with increased operating costs, also played a role in the earnings decline.The company’s upstream operations in the U.S. saw a significant increase in earnings, rising to $2.16 billion from $1.64 billion in the same quarter last year. This was driven by higher sales volumes and realizations, partly offset by increased depreciation and operating expenses. International upstream earnings, however, decreased to $2.31 billion from $3.30 billion, primarily due to the absence of prior year favorable tax effects and lower natural gas realizations. Downstream earnings in both the U.S. and international markets were also lower compared to the previous year, mainly due to reduced margins on refined product sales and higher operating expenses.

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Chevron Optimistic on Long-Term Performance

Chevron remains optimistic about its long-term performance, despite the challenges faced in the second quarter. The company has outlined several key focus areas, including enhancing its global exploration portfolio and continuing to invest in high-return projects. Capital expenditures for the second quarter of 2024 were $4.0 billion, up from $3.8 billion in the same period last year, largely due to increased investments in upstream operations, including post-acquisition spending on legacy PDC assets. Chevron’s free cash flow for the quarter was $2.3 billion, down from $2.5 billion in the previous year. However, free cash flow excluding working capital was $4.8 billion, compared to $5.7 billion last year. The company’s net debt ratio increased to 10.7 percent from 7.0 percent a year ago, reflecting higher debt levels and reduced cash and cash equivalents. Despite these financial pressures, Chevron’s management remains committed to delivering significant long-term earnings and cash flow growth.The company has also declared a quarterly dividend of $1.63 per share, payable on September 10, 2024. This marks the ninth consecutive quarter of over $5 billion in cash returns to shareholders. Chevron’s robust dividend policy underscores its confidence in its financial stability and future growth prospects. The company’s ongoing efforts to expand its exploration acreage and enhance production capabilities are expected to contribute positively to its financial performance in the coming quarters.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.

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