Chevron shares dropped on Friday after the company warned that results will remain depressed as long as oil prices stay low, and said it was further cutting its 2020 capital spending plan.
For the first quarter, Chevron reported earnings per share of $1.93, which included $680 million in one-time favorable items, and $31.5 billion in revenue, helped by downstream margins and increased production in the Permian Basin. In the same quarter a year earlier, the oil giant earned $1.39 per share on $35.20 billion in revenue.
Production at the nation's second-largest oil company rose 6% year over year to reach a record high of 3.24 million barrels per day of net oil-equivalent production. Chevron said production in the Permian rose 48% year over year.
Looking forward, Chevron said it will cut between 200,000 and 300,000 barrels of oil-equivalent production in May, and between 200,000 and 400,000 barrels of oil-equivalent production in June.
Chevron said lower oil prices will continue to have a significant impact. "Financial results in future periods are expected to be depressed as long as current market conditions persist," the company said. Chevron said that in the first quarter, the average price per barrel of crude and natural gas liquids was $37, roughly 23% lower than a year earlier, while the sale price for natural gas dropped from $1.64 to 60 cents.
Shares of Chevron lost 2.78% on Friday.
Energy companies have been forced to slash spending and cut costs following a historic drop in West Texas Intermediate, the U.S. oil benchmark, whose price shed 70% this year. Much of the decline is thanks to a drop-off in demand due to the coronavirus.
"We really have seen demand in places we've never seen before, and the market reflects that, and supply has been slower to respond to that, so prices reflect the real dramatic impact of the slowdown and in fact shutdown in economies around the world as we fight the virus," CEO Michael Wirth said Friday on CNBC's "Squawk Box."
But he said demand likely bottomed in the second quarter, and that in the last week or so, the outlook has started to improve.
"I think as we begin to see things move forward, and economies begin to pick up again, demand will gradually return," he said, adding that it's going to be a "very, very tough quarter."
Chevron said Friday it will reduce its 2020 capital spending plans by an additional $2 billion, to $14 billion, and said it expects operating expenses to fall by $1 billion. In March, the company had previously announced a 20% cut to its capital spending plan — from $20 billion to $16 billion — and said it was suspending its stock buyback program in an effort to reduce costs.
The company reiterated that its dividend is a priority, and that it's taking action to sustain it over the long term.
"Together these actions are consistent with our longstanding financial priorities: to protect the dividend; to prioritize capital that drives long-term value; and to maintain a strong balance sheet," Wirth said in a statement regarding the capital spending cuts.
Shares of Chevron have shed 26% this year.
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