Chevron Corporation (CVX), one of the Big Oil companies, has been showing stellar performance lately. Brent crude prices have soared 41% since July 2010 and Chevron stock has gone up by an impressive 67%. Its operating margins were around 13% last quarter, three percentage points ahead of its closest competitor, Exxon Mobil Corporation (XOM). Moreover, the company earned $23 per barrel on average this year, with the closest integrated oil competitor earning at least $5 per barrel less.
Chevron’s return on capital employed is 14.4%, one of the highest among integrated oil companies. The company has returned 5% consistently for the past seven quarters to its shareholders, and taking the company’s low debt-to-equity ratio of 14% into account, it can continue to pay such returns.
In its recent quarter (3QFY13), the California-based company missed expectations for both revenues and earnings. Rising upstream cost and weak refining margins (faced by most refiners) was the reason for the disappointing result. The market currently has an excess supply of gasoline which has led to a fall in prices, while crude oil prices continue to lie north of $100 per barrel. On the upside, Chevron has increased upstream production 3% year-over-over (YoY). With refining margins expected to remain depressed for at least another quarter, Chevron can depend on its upstream business to post earnings growth.
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