Friday, January 29, 2010

Chevron Bored with Downstream Op's

Chevron (CVX) reported lower Q4 results due to down stream issues such as reduced refinery margins. Both US and International operations had the same tale of woe. When you read the earnings release you can tell the company is more excited with the exploration side of the business and barely had time to explain what’s what with the downstream aspects. Sure demand is off as the economies of the world slowed.

They had something called a planned Q4 shutdown at El Segundo California. But no other comments about how they are managing the over capacity were offered. No comments about their pricing power and relative market share of the refinery markets that they operate in were provided. Investors are just expected to suck it up and accept.

Chevron is a managed company and investors expect management to provide management. If you want a naked exposure to a commodity you would just do that and buy the commodity outright in whatever form you find convenient. If you can experience billion dollar reversals within a single quarter you need billion dollar answers from management. Market forces do not justify their management contracts.

Chevron’s Chairman and CEO, John Watson is providing no effective guidance to shareholders by saying “Earnings decreased in 2009 as a result of lower crude oil and natural gas prices and a decline in refined product sales margins, driven by a weak global economy,” That statement can be made by an economics 101 student.