What to Look for From Chevron Corporation (CVX) This Earnings Season

Chevron Corporation (NYSE:CVX) is set to report earnings on Friday. Before every quarter, I like to prepare ahead of the release so that the results don’t bias my perception of the numbers after the fact. Here are five things I’ll be listening for in the company’s conference call this week.

Chevron Corporation (NYSE:CVX)For this specific quarter

(1) Weak production results

In March, Chevron Corporation (NYSE:CVX) reaffirmed its target to raise production 20% by 2017. However, it seems the company is off to a rough start. According to Chevron Corporation (NYSE:CVX)’s preliminary results posted earlier this month, the company’s international output fell 2.8% year-over-year. Fortunately it looks like most of this drop can be credited to planned maintenance work at the firm’s operations in Kazakhstan, Australia and Nigeria. But if those final results come in weaker than expected, it could call into question management’s ability to hit those long term goals.

(2) Updates on the litigation front

In June, Argentina’s Supreme Court revoked an embargo on the assets of the company’s Argentinian subsidiary. This was a major victory for Chevron Corporation (NYSE:CVX) in the company’s decades old litigation battle against indigenous groups in Ecuador.

But this contest is far from over. Because Chevron Corporation (NYSE:CVX) doesn’t have significant assets in Ecuador, representatives of the Amazon Defence Front are trying to freeze the company’s assets in other countries to enforce a $19 billion judgement. The plaintiff is pursuing Chevron Corporation (NYSE:CVX) in Brazil and Columbia and has also appealed the case in the United States. Investors should be eager to hear about any updates in the call.

Long term trends

(3) Risky bets in Latin America

With a market capitalization north of $240 billion, Chevron is going to need a lot of needle-moving projects if it hopes to achieve its long term production goals. But during the quarter the company made significant progress landing two joint venture agreements with Venezuela’s and Argentina’s state-run oil companies. While these deals are small relative to Chevron’s size, expect to hear more commentary regarding the company’s Latin America expansion.

This comes at a time when most energy majors are struggling to grow production. In April, rival Exxon Mobil Corporation (NYSE:XOM) reported its seventh consecutive quarterly decline in output with production falling 3.5% year-over-year. This comes in spite of $81 billion in capital expenditures since 2011.

Looking ahead, Exxon Mobil Corporation (NYSE:XOM) plans to spend about $38 billion per year through 2017, and management projects production will grow by 2% to 3% annually. But this is coming from a company that hasn’t hit its annual production target since 2006.