Chevron profit disappoints as refining posts first loss in four years

Updates with CEO comments from conference call in paragraphs 8, 15-16

By Shariq Khan, Sheila Dang and Seher Dareen

Jan 31 (Reuters) - Chevron CVX.N reported fourth-quarter earnings below Wall Street estimates on Friday as weak margins dragged its refining business into a loss for the first time since 2020.

CEO Mike Wirth told Reuters the post-pandemic surge in fuel margins had run its course, and the downtrend is set to continue this year.

Chevron, which on Friday became one of the first companies to heed U.S. President Donald Trump's executive order renaming the Gulf of Mexico the "Gulf of America," posted adjusted earnings per share of $2.06.

That fell below Wall Street's $2.11 estimate, pushing the second-largest U.S. oil producer's shares down over 4% to a three-week low of $148.68.

Profit on fuel sales tumbled across the industry last year, as demand faded and economic activity faltered in the United States and China, the two largest oil consumers.

Chevron's downstream business lost $248 million in the fourth quarter of 2024, compared with a profit of $1.15 billion in the same period a year ago.

Refining margins softened in both U.S. and international markets, but weak jet fuel demand aggravated troubles for the Houston-based company's domestic business. U.S. fuel sales fell 3% year-over-year, Chevron said.

"It was a quarter in which everything went one way and it was negative," Wirth said of the refining business on a post-earnings conference call.

Chevron's profit from oil and gas exploration and production rose to $4.3 billion from $1.59 billion a year ago when the figure included charges, but the U.S. business missed consensus estimates, RBC analysts said in a note.

"A relatively soft set of numbers," RBC analysts wrote of Chevron's results. "With the strong run CVX has had relative to peers over recent months, we expect these results to be taken as disappointing," they said.

Weak refining margins and lower oil prices during the fourth quarter also weighed on Exxon Mobil's XOM.N earnings, but the top U.S. oil producer beat analyst estimates. Exxon shares were down 1.8%.

Chevron remains locked in a bitter arbitration battle with Exxon over its proposed $53-billion takeover of Hess HES.N, which owns a 30% stake in Exxon's Guyana holdings.

RECORD PERMIAN OUTPUT

While refining struggled, Chevron's oil production held relatively flat in the fourth quarter at 3.35 million barrels of oil equivalent per day, compared with 3.39 million boepd a year ago.

Production from the Permian Basin of Texas and New Mexico grew 14% year-over-year to a record 992,000 boepd, bringing the company within touching distance of a target to reach 1 million boepd in the top U.S. oilfield this year.

Wirth said he believes Permian operators will keep capital spending modest and grow within their means, unlike the 2010s shale boom when their focus was to pump more oil.

"I don't see anybody that is heading back to what the industry was doing a decade ago - which is throwing all the capital on growth," he said.

Chevron expects its global output to grow 6% to 8% this year, and 3% to 6% in 2026, assuming Brent crude oil prices of around $70 a barrel, the company said. Brent currently trades around $77.

The company hiked its quarterly dividend 5% to $1.71 per share, reaffirmed expectations of adding $10 billion in free cash flow over the next two years, and pledged to continue buying back $10 billion to $20 billion of its shares annually, depending on market conditions.