Chevron warned Friday in its quarterly earnings report that results will remain depressed as long as oil prices remain low, and said that it was further cutting its 2020 capital spending plan.
For the first quarter Chevron reported EPS of $1.93, which included $660 million in one-time favorable items, and $31.5 billion in revenue, helped by downstream margins and increased production in the Permian. In the same quarter a year earlier the oil giant earned $1.39 per share on $35.20 billion in revenue.
Production at the U.S.' second largest oil company rose 6% year-over-year to reach a record high of 3.24 million barrels per day of net oil-equivalent production. Chevron said that production in the Permian Basin rose 48% year-over-year.
But looking forward the company said lower oil prices will have a significant impact. "Financial results in future periods are expected to be depressed as long as current market conditions persist," the company said in a statement. Chevron said that in the first quarter the average price per barrel of crude oil and natural gas liquids was $37, roughly 23% lower than a year earlier, while the sale price for natural gas dropped from $1.64 to 60 cents.
Shares of Chevron were about 2% lower during Friday's premarket trading.
Energy companies have been forced to slash spending and cut costs following a historic drop in West Texas Intermediate, the U.S. oil benchmark, which has shed 70% this year. Much of the decline is thanks to a drop-off in demand due to the coronavirus.
"We really have seen demand in places we've never seen before, and the market reflects that, and supply has been slower to respond to that, so prices reflect the real dramatic impact of the slowdown and in fact shut-down in economies around the world as we fight the virus," CEO Michael Wirth said Friday on CNBC's "Squawk Box."
But he said that demand likely bottomed in the second quarter, and that in the last week or so the outlook has started to improve.
"I think as we begin to see things move forward, and economies begin to pick-up again, demand will gradually return," he said, before adding that it's going to be a "very, very tough quarter."
On Friday Chevron said that it would reduce its 2020 capital spending plans by an additional $2 billion, to $14 billion. In March the company had previously announced a 20% cut to its capital spending plan — from $20 billion to $16 billion — and said it was suspending its buyback program in an effort to reduce costs.
The company again reiterated that its dividend is a priority, and that its taking action to sustain it over the long-term.
"Together these actions are consistent with our longstanding financial priorities: to protect the dividend; to prioritize capital that drives long-term value; and to maintain a strong balance sheet," Wirth said in a statement regarding the capital spending cuts.
Shares of Chevron have shed 23% this year.
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Chevron says results will be 'depressed' as long as oil stays low, taking steps to protect dividend - CNBC
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