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Chevron (NYSE:CVX) reported lower revenue and earnings in its third quarter Friday. Sales and other operating revenue fell roughly $5 billion, while net income dropped about $2.5 billion (or about 33%) from the same period a year ago. Both its upstream and downstream operations suffered as a result of difficult year-over-year comparisons, scheduled maintenance downtime, and negative foreign currency movements. We don't expect to make a material change to our fair value estimate, however. To view how we calculate Chevron's intrinsic value, please click here.

The firm's global net oil-equivalent production was 2.52 million barrels per day in the quarter, down from 2.6 million barrels per day in the year-ago period. Planned maintenance downtime, expected field declines, and shut-ins of the Frade Field in Brazil and in the Gulf of Mexico hurt performance. Lower crude oil and natural-gas prices drove US upstream earnings down nearly 26% from last year's quarter. International upstream earnings fared better, but still dropped over 14%, though this decline was mitigated in part by a $600 million gain on sale of an equity interest it sold to Tokyo Electric in the Wheatstone project. The company's US downstream operations were hurt by lower refining margins and poor cost controls, as segment earnings dropped over 35%. Earnings performance in its international downstream business was even worse, as one-time items in the prior-year period made the headline number look terrible (down nearly 82%).

Still, Chevron's cash balance is healthy at over $21 billion, up from $15.9 billion at the beginning of the year. And while its capital and exploratory expenditures continue to rise, we like its cash-flow generation profile. We're also encouraged by the progress it is making on a number of upstream projects, with Gorgon (Australia) and Bigfoot and Jack/St. Malo (Gulf of Mexico) reportedly being over 50% complete. The company's repositioning of its downstream business toward high-growth chemical and specialty products via non-core asset sales should also boost returns on capital. We continue to hold the firm in the portfolio of our Dividend Growth Newsletter. We like its dividend growth profile, and we outline why in this article here.

Source: Chevron Reports Difficult Third Quarter Results, But We Like Its Cash Flow Profile

Additional disclosure: CVX is included in our Dividend Growth Newsletter.