Chevron Corp is confronting a series of operational setbacks that are expected to impact its earnings into 2024, leading to a reduction in earnings estimates by Wall Street analysts and raising concerns about potential job cuts. In 2023, Chevron experienced setbacks in two crucial oil-producing regions – the U.S. Permian and Kazakhstan. Additionally, the anticipated quick approval of a $53 billion acquisition of rival Hess Corp has become uncertain.
Year to date, Chevron’s shares have declined by 15%, trailing behind its four major rivals – BP, Exxon Mobil, Shell, and TotalEnergies. Seven Wall Street firms have lowered their fourth-quarter earnings estimates for Chevron by an average of 12% in the last 30 days, with none of the 15 tracked firms raising their forecasts.
The company’s 2024 profit estimates have been cut by an average of 10.3% in the last 30 days to $14.17 per share. Chevron’s larger U.S. rival, Exxon Mobil, also had estimates lowered, but by less than 4%. Chevron’s historical premium for good operational delivery and capital allocation has waned, leading to concerns about investor confidence.
Chevron’s Chief Financial Officer, Pierre Breber, recently admonished workers in an email, highlighting that oil and gas production, refinery operations, and carbon abatement projects were all below plan, urging the company to “do better.” This message, coupled with a second request from U.S. antitrust regulators for information on its pending Hess acquisition, has raised speculations about potential cost and job cuts.
The delay in the approval of the acquisition will also impact Chevron’s access to the approximately 400,000 barrels of oil and gas per day that Hess would add to its output. Operational challenges in Kazakhstan and a 2% production decline in the Permian shale operations have added to Chevron’s difficulties.
While some analysts see 2024 as a “hiatus year in terms of growth,” others believe the recent underperformance positions Chevron as potentially favored among global oil majors in the coming year.