SAN RAMON, Calif. — Chevron lost $588 million in the fourth quarter of 2015 — its first quarterly red ink since 2002 — a setback that was unleashed by a slide in oil prices, prompting Chevron to warn that a fresh round of expense reductions, possibly including job cuts, are in the offing for 2016, the company said Friday.
The loss compares to a profit of $3.47 billion for the year-ago fourth quarter. The last quarterly loss for Chevron came in the July-September period of 2002.
“We are aggressively driving costs out of our business,” John Watson, Chevron’s chief executive officer, told analysts during a conference call Friday.
That includes reductions in capital spending, and potentially in staffing levels for the energy giant.
“We’re driving it hard to cut costs, but we are trying to do it so we keep the talent we need long-term in the organization,” Watson said in the conference call. “We’re taking significant action to improve earnings and cash flow in this low price environment.”
The decline in earnings for all of 2015, as well as the fourth-quarter loss, resulted from a nearly 50 percent plunge over a one-year period in prices for crude oil, the company said.
Chevron’s upstream business, consisting of exploration, production and development operations, suffered a fourth-quarter loss of $1.36 billion compared with a year-ago profit of $2.67 billion.
The downstream business, primarily composed of the refinery and retail operations, earned $1.01 billion in fourth quarter, down 33.4 percent from the same quarter a year ago. The U.S. downstream business earned $593 million in the fourth quarter, down 73.5 percent from the same quarter of the prior year.
Still, some bright spots emerged from the gloom of the quarterly report. Chevron’s production of oil and natural gas rose briskly at year’s end, reversing a trend of slumping oil production.
During the final three months of 2015, Chevron produced the equivalent of 2.67 million barrels a day, up 5.3 percent from the third quarter of 2015, when Chevron produced 2.54 million.
“The rising production levels are definitely an important part of Chevrons story,” said Luana Siegfried, a research associate with Raymond James, an investment firm. “Seeing production growth is a positive trend for Chevron.”
Chevron’s primary strategy for several years has been to focus its efforts on big projects to produce oil and natural gas. That approach worked well when oil prices ranged from $106 a barrel in April 2011 to $92 a barrel in July 2014.
But since the prior peaks of mid-2014, oil prices have nose-dived, falling about 64 percent in less than two years to the current levels of around $33 for West Texas crude.
The grim trends have dried up Chevron’s profits. For all of 2015, Chevron earned $4.59 billion, which was down 76.2 percent from a profit of $19.24 billion in 2014.
Per share, Chevron lost 31 cents during the October-through-December quarter, but analysts had predicted a profit of 45 cents.
Sales and other operating revenues in the fourth quarter totaled $28.01 billion, down 33.5 percent from the same period a year ago.
San Ramon-based Chevron slashed operating expenses and capital spending by $9 billion in 2015 compared with 2014.
Chevron eliminated hundreds of jobs during 2015. The company cut 600 Bay Area jobs, according to official company filings with state labor agencies.
“We are going to continue to live within our means,” Watson told the analysts. “We are going to cut costs. We are going to reduce spending.”
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
