High margins lift Chevron’s downstream earnings

Both US and international downstream earnings improved at Chevron, led by higher margins on the sales of refined products.

In its earnings report issued Friday, Chevron said its US downstream operations earned $731 million in the second quarter of 2015, compared with $517 million a year earlier.

"The increase was due to higher margins on refined product sales, partially offset by the absence of a 2014 asset sale gain and lower earnings from the 50%-owned Chevron Phillips Chemical," the company said.

US refinery crude oil input of 916,000 bpd was up by 155,000 bpd from the year-ago period. That increase was largely due to the absence of major crude unit turnaround during the 2014 second quarter at the El Segundo refinery in California.

US refined product sales of 1.23 million bpd were up by 3% from a year ago, primarily reflecting higher gasoline sales. Branded gasoline sales of 535,000 bpd were up 2% from the 2014 period.

Meanwhile, international downstream operations at Chevron earned $2.23 billion in the 2015 second quarter, compared with just $204 million a year earlier. That increase was primarily due to a $1.6-billion gain from the sale of the company's interest in Australian refiner Caltex. However, higher margins on refined product sales also contributed to the increase.

International refinery crude oil input of 774,000 bpd in the second quarter was down by 70,000 bpd from the year-ago period, due to the Caltex divestment.

Total refined product sales of 1.48 million bpd in the 2015 second quarter were down 69,000 bpd from the 2014 second quarter, again owing to the Caltex sale and accompanying reduction in gasoline and gas oil sales.

Overall, Chevron's net income during the second quarter fell to $571 million from $5.67 billion a year earlier, representing its lowest profit in more than 12 years and coming in well behind analyst estimates. Chevron's biggest business unit — oil and gas production — posted a loss, thus offsetting the strength in downstream earnings.

Earlier this week, Chevron said it would eliminate 1,500 jobs, or about 2.3% of its global staff, to help it cut spending by about $1 billion.