Earnings

Chevron suffers Big Oil blues as US gushes fossil fuels

Chevron will see declining earnings into 2015: Analyst
VIDEO3:1503:15
Chevron will see declining earnings into 2015: Analyst

The world's largest consumer of energy is producing oil and gas hand over fist. Yet judging by the earnings results of the three largest U.S. oil companies, you couldn't tell.

Chevron on Friday was the last of the Big Three oil companies to report earnings. The company recorded a steep drop in fourth-quarter profit, as shrinking refining margins and disappointing production around the globe sent earnings down 32 percent.

The second-largest U.S. oil company matched Wall Street's estimates, reporting a profit of $2.57 per share on revenue of $56.16 billion. Analysts had expected Chevron to report earnings per share of $2.57 per diluted share on $64.93 billion in revenue, according to a consensus estimate from Thomson Reuters.

Despite the U.S. shale boom expanding rapidly, Chevron saw sharply lower oil and natural gas production—singing the blues as the world's largest economy produces record amounts of fossil fuels. On Thursday, oil giant ExxonMobil posted a profit of $8.35 billion in the fourth quarter, but ended the year with its lowest annual profit in three years.

(Read more: US oil, gas juggernaut on course through 2016: EIA)

ConocoPhillips continued to be the lone exception, as the company by shedding offshore assets and redoubling U.S. production. Conoco's profit in the fourth quarter was $2.5 billion, or $2.00 a share, compared with $1.4 billion, or $1.16 a share, a year earlier. Still, its stock is mired at its lowest levels since late August, as investors take a jaundiced view of Big Oil's ability to profit from the U.S. shale revolution.

The big companies are suffering from problems related to scale, analysts say, with players like Chevron and Exxon on the outside looking in as investment flocks to hotbeds of U.S. energy production.

After years of megamergers, multinational companies remain too large to merge with the smaller, more nimble competitors that are profiting from the North American energy boom.

"They're so big that for them to move the needle to grow revenue and earnings fast enough, you need real dollar increases" in their bottom line, said Leo Kelly, managing director at Kelly Wealth Management.

Natural gas production would be a key growth area for the majors, Kelly added. However, Big Oil has yet to make a real dent in the highly competitive market for hydraulic fracturing, or fracking.

Getty Images

"The problem with the big multinationals is that fracking is still such a fragmented market," Kelly said. "Are they really going to, unit by unit, pull oil out of the ground and move billions of revenue? While production growth here has been astounding, it's not enough yet to pull them in."

Chevron said its oil and natural gas production fell 3.4 percent during the quarter, to an equivalent of 2.6 million barrels per day (bpd) of oil, even as it spent more than twice year over year on exploration. Total worldwide capital and exploration expenses jumped to $12.96 billion, from $11.56 billion in the prior year.

According to the company, it added about 800 million barrels of net oil-equivalent proved reserves in 2013, the bulk of which came from two U.S. shale production hot spots, the Marcellus and the Permian Basin. Still, both upstream and downstream earnings showed significant deterioration from the year-earlier quarter.

Total upstream earnings fell to $4.85 billion, while total downstream profit plunged to $390 million from $925 million.

Chevron's stock, traded on the New York Stock Exchange, tumbled by nearly 4 percent in Friday trading. (Click here to get the latest quotes for the company.)

Its Big Oil cohorts, Exxon and ConocoPhillips, were also lower on the day.

—By CNBC.com's Javier David. Follow him on Twitter @TeflonGeek. Reuters contributed to this report.