Chevron’s downstream business soars on higher refined product margins

By Ben DuBose

US downstream operations for Chevron earned $706 million in the first quarter of 2015, compared with earnings of $422 million a year earlier, the company announced on Friday.

The increase was due to higher margins on refined product sales, partially offset by the absence of a 2014 gain on sale of an interest in a pipeline affiliate and lower earnings from the 50%-owned Chevron Phillips Chemical.

US refinery crude oil input of 918,000 bpd in 2015 increased by 46,000 bpd from the year-ago period. The increase was primarily due to lower 2015 downtime at refineries in Richmond and El Segundo, California.

Refined product sales of 1.21 million bpd were up 1% from the 2014 first quarter, while branded gasoline sales of 504,000 bpd were essentially flat with the 2014 period.

Meanwhile, Chevron's international downstream operations earned $717 million in the 2015 first quarter, compared with $288 million a year earlier. The increase was due to higher margins on refined product sales, partially offset by an unfavorable change in effects on derivative instruments. 

Foreign currency effects increased earnings by $54 million in the 2015 quarter, compared with a decrease of $28 million a year earlier.

International refinery crude oil input of 782,000 bpd in 2015 increased by 8,000 bpd from the year-ago period. Increased crude runs due to the absence of 2014 planned downtime at the Star Petroleum Refining Co. in Thailand were largely offset by the decrease due to the October 2014 conversion of an affiliate refinery into an import terminal in Kurnell, Australia.

Total international refined product sales of 1.58 million bpd in the 2015 first quarter were up 177,000 bpd from the year-ago period, mainly due to higher gasoline and jet fuel sales. 

“Downstream operations were strong, benefitting from lower feedstock costs and improved refinery reliability," said Chevron CEO John Watson.

Overall, Chevron's first-quarter earnings fell from $4.5 billion in 2014 to $2.6 billion in 2015, owing to reduced revenue and earnings in the upstream business due to sharply lower oil prices.