1Q16 Earnings Review: Chevron’s Stock Performance and Capex

Why Do Analysts Expect Chevron to Post a Loss in 1Q16?

(Continued from Prior Part)

Chevron’s stock performance

In 2016, integrated energy stocks rose since February due to spikes in oil prices. Rising oil prices are favorable for integrated energy companies’ upstream segment earnings. Since mid-February, Chevron (CVX) saw its stock price rise by ~23%.

Chevron’s peers like YPF (YPF) and PetroChina (PTR) rose by 10% and 25%, respectively, during the same period. Statoil (STO) rose sharply by 35%. The PowerShares Dynamic Large Cap Value ETF (PWV) has ~11% exposure to energy sector stocks.

Chevron’s cost, capex, and divestment plans

Currently, Chevron is focused on reducing its operating and capital costs and rechurning its portfolio. It took measures to cut costs across the supply chain. Chevron expects to save around $2 billion from cost reductions in 2016.

Chevron also cut its total capital and exploratory budget for 2016 to $25 billion–$28 billion. It’s down from $34 billion in 2015. The company cut its capital and exploratory spending for 2017–2018 even more to $17 billion–$22 billion per year.

The company churned its portfolio to retain only competitive projects. Proceeds from asset sales amounted to $11.5 billion in 2014–2015. Of this, $6 billion was from the downstream segment and $5.5 billion was from the upstream segment. Chevron expects proceeds of $5 billion–$10 billion in 2016–2017 from its asset sales program.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Chevron’s 1Q16 Estimates Are Expected to Be Lower

• Part 2 - Analyzing Chevron’s Segmental Outlook before Its 1Q16 Earnings

• Part 4 - How Do Analysts Rate Chevron before Its 1Q16 Earnings?