Shares of Chevron fall after the oil major reports its US output declined in third quarter

  • Shares of Chevron fell after the company reported its combined U.S. oil and gas production declined in the third quarter.
  • Chevron earned 85 cents a share excluding certain items, missing analysts' profit expectations.
A Chevron gas station in Greenbrae, Calif., on May 2, 2014.
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A Chevron gas station in Greenbrae, Calif., on May 2, 2014.

Shares of Chevron fell on Friday as the oil major said its overall U.S. production fell in the third quarter despite output increases in the Gulf of Mexico and the Permian basin, the epicenter of the American drilling recovery.

The higher production from the key oil-producing regions was offset by asset sales and the natural decline of wells in other areas, the company said. U.S. production was down by 17,000 barrels per day of oil equivalent, driven by lower natural gas output.

Chevron's stock was trading down nearly 2 percent at $116.25 per share in pre-market trading.

Despite the headwind in its U.S. exploration and production segment, profits were up 52 percent and revenues jumped about 20 percent from a year ago. Cash flow from operations — a key measure of financial health in the industry — rose nearly 60 percent to $14.3 billion in the first nine months of the year.

"We continue to see improvement in the underlying pattern of earnings and cash flow," Chevron Chairman and CEO John Watson said in a statement.

"We're completing projects that have been under construction and ramping up production, notably at our Gorgon LNG Project in Australia. And our shale and tight rock drilling activity in the Permian Basin is exceeding expectations," he added.

The San Ramon, CA-based company reported earnings of $1.95 billion, or $1.03 per share, on revenues of $36.21 billion. Analysts had expected earnings of 98 cents a share on $34.05 billion in revenues.

However, excluding certain items, Chevron posted earnings of 85 cents a share, Reuters reported. The market appeared to be focusing on this metric.

In the year ago period, Chevron earned 68 cents per share on $30.1 billion in revenue.

Earnings in the oil giant's upstream segment, which explores for and produces oil and natural gas, improved slightly to $489 million. The quarterly loss in the U.S. upstream business narrowed to $26 billion from $212 million in the year-ago period.

Chevron's refining business, which processes crude oil into fuels like gasoline, saw profits surge 70 percent from last year to $1.8 billion. The surge came from higher profit margins in the U.S. refining segment and gains from international asset sales.