Large Acquisition Not Expected for Chevron

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Large Acquisition Not Expected for Chevron

04/26/2013

SAN RAMON, Calif. -- Despite carrying a $17.37-billion cash surplus, Chevron Corp.’s Vice President and Chief Financial Officer Pat Yarrington said during today's 2013 first-quarter earnings call that the company will most likely use its surplus cash to repurchase shares and increase its dividend to shareholders.

Three months ago, the CFO denied rumors of an acquisition when discussing the company's 2012 fourth-quarter earnings. This time, she focused on what Chevron will do with its excess cash and simply stated the company will "pursue additional growth opportunities" regarding its upstream division.

"I don't want to have a generic statement," Yarrington responded during the question-and-answer session of today’s earnings call. "It depends on the quality of the asset. High-quality assets are often too expensive."

Hess Corp. and Chesapeake Energy Corp. were linked as possible acquisition targets for Chevron in the past. However, those rumors died down in recent months.

"We purchased $1.25 billion worth of stock in our share repurchase program in the first quarter [of 2013] and plan to purchase a similar amount in the second quarter," Yarrington noted on today's call.

Chevron's board of directors increased its quarterly dividend by 11.1 percent to $1 per share, she added.

Several analysts in the past have surmised that a large acquisition by Chevron would make sense because it carries a large cash balance that earns little interest. Chevron has since reduced its cash balance somewhat, though. The $17.37 billion figure as of March 31 compares to a $20.93 billion surplus as of Dec. 31.

As for earnings at its downstream division -- parent to its convenience stores and gas stations -- Chevron achieved a $135 million profit in its latest quarter, a large decline compared to the $459 million it earned in the year-ago period. According to Yarrington, weaker margins, lower demand for gasoline and refinery maintenance accounted for the downstream earnings fluctuation.

Companywide, Chevron earned a net profit of $6.2 billion in its most recent quarter vs. a $6.5 billion gain during the company's 2012 first quarter.

Despite the slight dip in earnings, the company’s results bested Wall Street analyst expectations.

"We're off to a great start in 2013," Yarrington said. "Earnings are strong."