Chevron’s Earnings Disappoint, Hess Deal Delayed

Chevron Corporation reported a significant decline in second-quarter earnings on Friday, sending its shares down by 3%. The oil giant also revealed that its planned $53 billion acquisition of Hess Corporation is likely to be postponed until mid-2025, if not entirely blocked. This news follows recent statements suggesting a potential delay of up to a year.

Chevron is eager to acquire Hess to gain a foothold in Guyana, home to a major oil discovery. The deal was also seen as a way to offset challenges faced by the company’s Australian and Kazakhstan operations, which experienced production issues. Despite prior warnings of lower oil output and refining margins, the severity of the earnings decline surprised investors.

Chevron’s quarterly earnings fell by 19% to $2.55 per share, missing Wall Street expectations by a wide margin. CEO Michael Wirth attributed the disappointing results to operational issues and other factors.

The company’s plans to enter Guyana’s lucrative oil market have been hindered by a legal challenge from Exxon Mobil. The ongoing arbitration process is expected to delay the deal closing until well into 2025. Wirth expressed openness to a compromise with Exxon but admitted that such a resolution seems unlikely.

Exxon claims that its existing agreement with Hess and China’s CNOOC gives it the right to purchase Hess’s Guyana assets first.

Chevron’s overall earnings for the quarter dropped to $4.4 billion from $6 billion a year ago. Adjusted earnings also declined. In contrast, Exxon exceeded analyst expectations on the strength of its U.S. shale and Guyana operations.

Chevron’s oil and gas production earnings fell by 9.4% due to weakness outside the United States. The company’s fuels and chemical operations suffered a significant 60% decline, largely attributed to weak refining margins. This industry-wide issue impacted other major oil companies like Exxon and Shell.

The decline in refining profits stems from lower gasoline demand in the second quarter following a surge in production earlier in the year.