Chevron cash flow from operations falls
Free cash flow (FCF) is an important metric for evaluating Chevron
(CVX). That outlook is a bit muddier today than a couple of weeks ago, I’d wager.
The company’s cash flow from operations fell to $9.7 billion from $15.3 billion
a year ago. That whoopee cushion goes off amid a backdrop of complicated
details. Worth saying Chevron's blurt comes on a day when the S&P 500 enters 10% correction territory - this happened to Nasdaq too yesterday.
Chevron agreed to buy Hess Oil this week for $53 billion, a few days before missing performance estimates in earnings report. The purchase is meant to improve cash flow per share accretion, higher distributions to shareholders (dividends] and is said to enhance and extend production and free cash flow growth outlook into the 2030s, while also providing a nifty Christmas gift for the toy truck loving amongst us.
“If it weren’t for the people … earth would be an engineers’ paradise.” – Kurt Vonnegut, Player Piano
The stock market may not be ready to look into the future on this one, especially because today’s report tells of missed deadlines and cost overruns in projects in the Great State for Texas [wastewater and fracking problems] and the Great State of Kazakhstan [here taking $1B off of guidance]. Blame for latter? “Rosy previous estimate.” This doesn’t bode well for ROE, another important measure. Or faith in management, another important measure. The Hess purchase almost looks like a feint meant to offset the quarter’s bad news. What Hess buys Chevron is output from the Great State of Guyana.
https://www.chevron.com/newsroom/2023/q4/chevron-announces-agreement-to-acquire-hess
Kazakhstan Blues combined with news of weaker than expected
earnings and delays sent shares lower. This resulted in a loss of $17 billion
in market cap. Morningstar is sticking with its $172 per share fair value [+17%].
This is an attempt to upgrade and diversify Chevron's
already diversified global oil field. It is important in one way: Depletion and restocking of oil reserves is an important issue for oil producers. But this isn't particularly popular move, the price is high.
Tho it is a stock deal and lost a lot of mojo as a result of this week’s
Chevron pullback. They say it will pay off with accretiveness in 2025. The deal will
increase Chevron's debt load but it doesn't seem to boost confidence in the
management. Stock lost 15% in five days even as it had been
buoyed by the two-edged sword of Israeli Gaza. War. Slump has already cut $6.5
billion from the Hess Deal. Is it's completion now under question? No they say but that is additional element of Uncertain. Oil prices rallying and
falling back on a daily basis - proving oil is a very volatile mixture. This
sudden plunge in major S&P player was a surprise to your intrepid reporter. What you dont see coming has you're going... and some say hold.
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| Chevron moved up from July to October then fell with a thud. If it finds a way to move up people will sell all along the way. |
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