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Chevron reported weak interim results and will miss analyst estimates by $0.20 this quarter.

Production was lower on a sequential and annual basis, which can be partly blamed on the weather.

Still with a $40 billion cap-ex budget, Chevron should be growing production at least 1-3%.

Until there is sustained production growth, shares are range bound between $112 and $122, and investors should look elsewhere.

As it always does during the beginning of earnings season, Chevron (NYSE:CVX) provided investors with an interim update of its results after the bell on Wednesday (financial and operating data available here). Between harsh weather and volatile commodity prices around the world, this has been a challenging quarter, and it looks like Chevron will be missing estimates. Chevron continues to aggressively invest in expansion projects, but production growth has consistently been towards the low end of guidance, though the impending completion of a massive LNG project in Australia could provide some upside. Still for shares to get beyond the $112-$122 range they have spent much of the last year, Chevron will need to show stronger production growth to assuage investor concerns that the cap-ex budget is not delivering results.

Adjusting for one-time charges related to Chevron's mining operation, quarterly earnings are expected to be similar to the fourth quarter of 2013. This would translate to about $2.57 in EPS compared to the $2.75-$2.80 most analysts were looking for. In the first quarter of 2013, Chevron earned $3.18, so there will be a sizable year over year decline mostly due to weak production and to tighter WTI/Brent spreads that hurt Chevron's downstream results.

On the upstream business, production results were disappointing to be frank even in light of the fact that poor weather forced some downtime. Daily oil-equivalent production during the first two months of the quarter was 2% lower than during the fourth quarter in its U.S. operations. Year over year, the decline was 4%. These interim results only include production data from January and February, so hopefully March was a stronger month and can lessen this decline. Still, Chevron is budgeting $40 billion for cap-ex in 2014 and spent even more in 2013. Given this amount of money being spent to develop new wells, production should not be falling even in light of the weather.

Now, the weather was primarily a U.S. event, so it is unsurprising that international results were better. Still, they were not terribly impressive even with higher output at its LNG operation in Angola. Production did increase by 1% sequentially, but it fell 2% year over year. I was hoping to see Chevron at least show flat output year over year. Natural declines at existing wells continue to outpace production at new wells. Without the weather to blame, these international results are definitely disappointing and make sizable production growth seem unattainable. Combined, Chevron's global production fell 2.5% from the same quarter last year.

Due to maintenance activity and lower production, refining volumes were down sequentially, and spreads were also a bit of a headwind. Chevron also expects adverse foreign exchange fluctuations will cost it about $100 million. Chevron's results are driven by upstream production. Admittedly, the weather was a complicating factor, but the performance during the first two months of the year was disappointing. Unfortunately, we don't have clean production data, but a 2.5% year over year decline is weak for a company investing $40 billion annually in expansion projects. Chevron had hoped this level of investment could spur 1-3% annual production over the next few years.

However, I now expect production to be roughly flat year over year, which means Chevron will likely be slightly free cash negative in 2014. With the timing of new projects coming on-line, international results should improve in the back half of the year, but if they don't, bigger problems could be coming. Moreover, it is increasingly expensive to extract oil, but prices are a bit soft thanks to lackluster growth and increasing U.S. supply. These factors will pressure Chevron margins during this year.

Now, it isn't all doom and gloom. Chevron is still massively profitable, and cap-ex spending should consistently decline over the next 3-5 years as major projects are completed. Shares also sport a solid 3.4% yield, and Chevron has methodically increased its payout for over a decade. Nonetheless with flat production and rising costs, I expect earnings to be about $10.75-$11.05 this year, which is below last year's $11.09. Until Chevron can demonstrate consistent production growth, I expect shares to trade 10-11x earnings. After another quarter of lackluster production, shares are dead money at $119. The dividend does pay patient investors to wait, but investors interested in getting long Chevron should wait for a better entry point. Without growth, there is no catalyst for shares to move higher. Until shares move back towards $110-112, I would not be a buyer of CVX.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.