Chevron's Warning: A Warning-Lite, With Refining Twist (CVX, XOM, COP, VLO)

Chevron Corp. (NYSE: CVX) is apparently neither immune to international currency issues nor to swings in the oil patch despite oil  prices being higher year-over-year. The company has issued a slight earnings warning that is not the end of the world on the surface.  We are watching the reaction in shares of Exxon Mobil Corporation (NYSE: XOM), ConocoPhillips (NYSE: COP), and Valero Energy Corp. (NYSE: VLO) in conjunction with the news.

Chevron expects lower third quarter results than the second quarter. Cited were “Non-cash foreign currency effects due to the weakening dollar.”  The dollar is expected to bite about $400 million of the full quarter’s earnings, primarily in the international upstream unit.  Also noted was a higher expense and lower crude oil realization further reducing its Upstream earnings.

The U.S. net oil-equivalent production during the first two months of the third quarter decreased 16,000 barrels per day versus second quarter average.  Cited was small declines across multiple assets.  International net oil-equivalent production rose slightly against the second quarter with a small an increase of 3,000 barrels per day.

There is an interesting note in this “warning” for refining stocks.  Its refining margins actually rose according to the available data that is still unfinished in its unofficial tally.  Unfortunately, its marketing margins were not all higher at the same time.  It noted, “For the full third quarter, worldwide refining, marketing and chemical indicator margins were mixed.”  As a mix again, “Downstream earnings in the third quarter are expected to also be negatively impacted by unfavorable foreign currency effects, as well as mark-to-market effects on open derivative contracts tied to underlying physical positions.”

Chevron shares closed up 0.16% at $83.84 versus a 52-week trading range of $66.83 to $84.50.  Chevron’s after-hours reaction has shares down 0.5% at $83.40.  Exxon Mobil Corporation (NYSE: XOM) shares rose 0.23% to $64.70 and its shares are down 0.25% at $64.54 in the after-hours session.  As a reminder, both Chevron and Exxon are DJIA components.

ConocoPhillips (NYSE: COP) closed up 0.3% at $59.61 and its shares are not really trading in reaction yet to the news.  Valero Energy Corp. (NYSE: VLO) fell 0.66% to $17.97 today, but its shares are actually up 0.3% in the after-hours trading at $18.02.  A general warning won’t matter here to Valero, but an apparent gain and even mixed results in refining margins is a welcome sign compared to many of the ongoing refining sector trends here.

JON C. OGG