Shares of Chevron gave up about 2 percent of their value in pre-market trading Friday as the oil giant turned in quarterly results that badly missed estimates.
Chevron executives pointed to lower margins in its refining business and tax charges as drags on earnings during a conference call. They also said layoffs were largely behind them, but the company would continue looking for ways to drive down costs.
The company also said it will be able to fund spending and dividends in 2017 with cash generated from operations, following a downturn that forced oil giants and smaller drillers alike to tap debt and other to sources to pay for normal business operations.
"Our 2016 earnings reflect the low oil and gas prices we saw during the year," Chairman and CEO John Watson said in a statement. "We responded aggressively to those conditions, cutting capital and operating expenses by $14 billion."
Chief Financial Officer Patricia Yarrington said on the conference call Chevron is considering more assets sales. "Additional opportunities are in progress and many will close in 2017," she said.
Last month, the company said it would lower its capital spending for a fourth consecutive year. Chevron's $19.8 billion program for 2017 will focus on projects with shorter cycles and higher returns aimed at producing oil and gas within two years.
That includes more drilling in the the U.S. Permian basin, located in Texas and New Mexico, which is leading the nation's shale oil recovery, Watson said. The company said it was operating 10 oil rigs in the region and planning to add another about every eight weeks, he said on Friday.
Chevron also provided updates on its critical Gorgon liquefied natural gas project, which experienced some shutdowns in 2016, as well as its Wheatstone natural gas hub.
Watson acknowledged the first phase of Gorgon's ramp-up missed expectations and said Chevron would apply those lessons to future phases there and at Wheatstone. He said the next phase of Gorgon would start processing LNG early in the second quarter. Phase one of Wheatstone is scheduled for mid-2017, with phase two expected six to eight months later.
The company reported fourth-quarter earnings of $415 million, or 22 cents a share, on revenue of $31.5 billion. Analysts had expected Chevron to earn 64 cents on revenue of $33.3 billion, according to a consensus estimate from Thomson Reuters.
In the year-ago period, Chevron reported a loss of $588 million, or 31 cents a share, shortly before oil prices hit 12-year lows.
Low crude oil and gas prices throughout much of 2016 pushed the oil giant to a loss for the year. For 2016, Chevron reported a loss of $497 million, or 27 cents a share.
Cash flow, a key measure of corporate health in the oil and gas industry, was $12.8 billion in 2016, down from $19.5 billion the previous year.
Chevron spent $22.4 billion on capital projects and exploration last year, down from $34 billion in 2015, reflecting the industry trend of reducing expenses to weather the downturn.
Chevron saw results improve from the year-ago period in its upstream business, which includes exploration and production of fossil fuels. The company chalked that up to lower exploration and operating expenses and its oil and gas fetching a higher price.
Oil prices stabilized above $50 a barrel in the fourth quarter after OPEC and other major oil producers agreed to cut production.
In the downstream segment, which includes refining and marketing fuel, Chevron saw fourth-quarter profits slide both in the United States and abroad. The company broke even in its U.S. downstream business, compared with profits of $496 million a year ago.
Integrated oil companies such as Chevron have seen their refining margins shrink on the rising price of crude oil, the raw material for many fuels. Throughout much of the oil price downturn that began in 2014, low crude costs boosted refining margins.
Revenues for the quarter were $30 billion, up 7 percent from sales of $28 billion a year ago.
On Wednesday, the San Ramon, California-based oil giant announced a quarterly dividend of $1.08 a share, unchanged from the previous quarter, when it hiked the shareholder payout by a penny.
Correction: This story has been updated to reflect that John Watson made the comments on the conference call about Chevron projects in the Permian and Australia.