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Hess acquisition helps boost Chevron's ( CVX ) quarterly profit

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Cash flow grows 20% year-on-year on rise in output

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'High confidence' free cash flow will keep growing, CFO

says

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Upstream earnings decline 28% due to lower oil prices

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Downstream profit jumps 91%

By Sheila Dang

HOUSTON, Oct 31 (Reuters) - Chevron ( CVX ) beat analyst

estimates on Friday as record oil and gas production, boosted by

its $55 billion acquisition of Hess, and stronger refining

margins lifted the No. 2 U.S. oil producer's results for the

third quarter.

Adjusted earnings for the three-month period ended September

30 were $3.6 billion or $1.85 per share, which handily beat the

consensus estimate from analysts of $1.68 per share as compiled

by LSEG.

Cash flow from operations excluding working capital grew

nearly 20% year-over-year to $9.9 billion, driven in part by

production growth in areas including the Permian Basin and the

U.S. Gulf of Mexico, Chevron ( CVX ) Chief Financial Officer Eimear

Bonner said in an interview.

The company said in an investor presentation that it expects

strong cash generation to continue, even with lower oil prices,

because of increased capital efficiency and growth in

high-margin assets.

Chevron ( CVX ) completed the acquisition of Hess in July, which

gave the company access to a prolific oilfield in Guyana

operated by larger rival Exxon Mobil ( XOM ). The deal puts

Chevron ( CVX ) in a better position to weather oil price volatility

with a source of profitable production, investors have said.

The new combined company produced 4.1 million barrels of oil

equivalent per day (boepd), a record high and up from Chevron's ( CVX )

standalone production of 3.4 million boepd in the same quarter

last year.

The results were also buoyed by lower costs, as Chevron ( CVX ) is

on pace to reach $2 billion to $3 billion in cost reductions

next year, Bonner said.

"Those are the catalysts that are coming together to give us

this high confidence in free cash flow growth with lower

execution risks, given that all these major milestones are

behind us," she said.

DOWNSTREAM EARNINGS JUMP WITH HIGHER REFINING MARGINS

Upstream earnings totaled $3.3 billion, a 28% decline from

the same period last year due to lower oil prices. Chevron's ( CVX )

profit from the downstream business jumped 91% over the same

time frame to $1.1 billion, driven by higher refining margins

and lower operating expenses in the U.S.

Chevron ( CVX ) paid $3.4 billion in dividends and bought back $2.6

billion worth of shares during the quarter. The company said

capital expenditure, which totaled $4.4 billion in the third

quarter, rose from the same period last year because of spending

on legacy Hess assets.

Benchmark Brent crude prices averaged $68.17 over

the third quarter, down about 13% from the same period last year

and up 2% from the second quarter. The OPEC+ group of oil

producers increased its output throughout the year, raising

fears about oversupply and hampering crude prices.

Average U.S. natural gas prices during the quarter rose

about 38% compared with the year-ago quarter.