Chevron sees Iran war oil boost, warns hedging to weigh

By Sumit Saha

April 9 (Reuters) - Chevron ‌said on Thursday ​it expected ​first-quarter upstream earnings to rise between $1.6 billion and $2.2 billion from the previous quarter, fueled by higher oil prices due to the Iran war, though ‌an impact from hedging could weigh on results.

The U.S. oil major ⁠said timing effects tied to hedging and accounting were expected to cut into earnings and operating cash flow, ‌excluding working capital, by $2.7 billion ‌to $3.7 billion after tax, largely in its downstream business. The impact is expected to reverse in the future, it said.

The warning mirrors comments from rival Exxon Mobil, which ​on Wednesday signaled that while higher oil prices could lift upstream earnings by about $1.4 billion compared with the fourth quarter, overall earnings could fall as a multi‑billion‑dollar ⁠hit from financial hedging outweighs price gains.

The conflict, which started on February 28, sent oil prices skyrocketing as much ​as 65%, with some oil and gas fields in the Middle East shutting production after the Strait of Hormuz - a conduit for a ​fifth of global energy flows - was effectively closed.

Shares ‌of the company rose about 1% in premarket trading, tracking higher oil prices.

"Chevron has the lowest exposure to the Middle East across ⁠the supermajors, with liquids from the region accounting for just over 1% of group production, leaving it better placed than peers to benefit from the current commodity upside," said RBC Capital Markets analyst ⁠Biraj Borkhataria.

Chevron's net oil-equivalent production is expected to average 3.8 million to 3.9 million barrels per ​day, with volumes affected by downtime at Kazakhstan's Tengizchevroil project and reduced output in parts of the Middle East.

Across the Atlantic, Shell also said weaker first-quarter gas output and a hit to short-term ‌liquidity would be partly offset by stronger oil trading, offering an early glimpse into how the U.S.-Israeli war on Iran is reshaping ‌oil majors' earnings.

Chevron, which is expected to report results on May 1, posted fourth-quarter upstream earnings ⁠of $3.04 billion.

Analysts expect the oil major ‌to post net income ​of $3.2 billion for the quarter ended March 31, according to data compiled by LSEG.

(Reporting by Sumit Saha in Bengaluru; Editing by Vijay Kishore and ‌Pooja Desai)

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