Wall Street analysts cut views on Chevron as setbacks mount According to Reuters


© Reuters. FILE PHOTO: A Chevron gas station sign is seen in Austin, Texas, U.S., October 23, 2023. REUTERS/Brian Snyder/File Photo

By Sabrina Valle

HOUSTON (Reuters) – Wall Street analysts cut their earnings estimates Chevron Corp (NYSE: ) and employees are bracing for potential job cuts as a series of operational setbacks set to permeate 2024.

Chevron’s 2023 turnaround in two key oil-producing regions — the U.S. Permian and Kazakhstan — and its hopes for quick approval of a $53 billion acquisition of a rival business have hit Chevron. Hess Corp (NYSE: ) turned dark.

The company’s shares have fallen 15% since the start of the year, underperforming the shares of its big four rivals — BP (NYSE: ) , ExxonMobil (NYSE: ), Shell (LON: ) and TotalEnergies (EPA: ). The stock’s weak return contrasts with its performance against the same companies over the five years to December 2022.

Seven Wall Street firms cut their fourth-quarter earnings estimates for Chevron by an average of 12% over the past 30 days, according to investment firm LSEG. None of the 15 firms LSEG tracks has raised its forecast.

“Chevron is a performance-driven company and recognizes that we have not lived up to our potential,” a spokesman said in an emailed response. He did not comment on whether the company is considering job cuts next year.

Chevron’s 2024 earnings estimates have fallen an average of 10.3% over the past 30 days to $14.17 per share, according to LSEG. Its larger US rival, Exxon Mobil, also had lower estimates, but by less than 4%.

Investors have historically valued Chevron as a premium for good operating delivery and capital allocation, said Citibank analyst Alastair Syme, who cut his price target on the company to $148 from $170 this month and called it neutral.

WILL 2024 BE A DRAW?

Restoring investor confidence in the company’s operating goals “may take some time,” Syme said, characterizing 2024 as a “growth pause year.”

The first half of 2024 “is clouded by M&A,” said UBS analyst Josh Silverstein, who this month cut his price target on Chevron to $185 from $194. Still, he rates the company a buy due to its “discounted share price” and prospects for new oil production beyond the second quarter of 2024.

Chevron Chief Financial Officer Pierre Breber admonished employees in an email this month, saying its oil and gas production, refining operations and carbon-reduction projects were below schedule.

“We can – and must – do better,” he said in an unusually harsh report that alarmed some employees who saw the memo as a sign that the company is preparing to cut costs and jobs to improve results for 2024.

Breber’s reprimand came alongside a second request from US antitrust regulators for information about his pending acquisition of Hess.

Chief executive Michael Wirth said the request meant the closing of the deal would “stretch out over the course of the year” from his hope for a first-quarter completion. The delay will suppress Chevron’s access to about 400,000 barrels of oil and gas per day (bpd) that Hess would add to Chevron’s production.

In October, Wirth revealed more than six months of delays and higher-than-expected costs for a 260,000 bpd expansion at its massive oil project in Kazakhstan. Production at the plant will drop by 50,000 barrels per day compared to 2023 due to maintenance and equipment changes.

At its Permian shale operations, Chevron’s production fell 2% in the third quarter from the second. However, it expects to finish the year with a 10% year-over-year increase, officials said.

The company closed the acquisition of the shale producer in August PDC energy (NASDAQ:) Inc, which added 285,000 bpd to Chevron’s U.S. output. It reaffirmed the previous recommendation to increase production by 3% per year, now on a higher base.

“Recent underperformance,” said Bank of America analyst Doug Leggate, “places the stock as a potential favorite among the world’s oil majors in 2024.”