U.S. energy giant Chevron Corp. (CVX - Analyst Report) reported strong third quarter earnings on improved downstream results that saw refining margins climb on lower input costs. Earnings per share came in at $2.95, well above the Zacks Consensus Estimate of $2.54 and also improved from the year-ago profit of $2.57 per share.

Chevron follows other integrated supermajors like BP plc (BP - Analyst Report), Royal Dutch Shell plc (RDS-A- Analyst Report) and Exxon Mobil Corp. (XOM - Analyst Report) to come out with third quarter profit beat.

Chevron Corporation - Quarterly EPS (BNRI) | FindTheBest

However, the company’s quarterly revenue decreased 6.5% year over year to $54,679 million and underperformed the Zacks Consensus Estimate of $56,665 million amid a decline in crude oil prices.

Segment Performance

Upstream: Chevron’s total production of crude oil and natural gas decreased nearly 1% from the year-earlier level to 2,568 thousand oil-equivalent barrels per day (MBOE/d). Though the U.S. output augmented 3.4% year over year, the company’s international operations (accounting for 74% of the total) registered a 2% fall in volumes.

Contribution from project ramp-ups in the U.S., Nigeria, Brazil and Argentina, together with better reliability in Kazakhstan helped volumes. But these factors were more than offset by normal field declines, production entitlement effects in certain regions and output loss as a result of Chevron’s policy to shed some of its less-profitable projects.

Losses on the production front were accompanied by lower oil prices, the net effect resulting in an 8.7% year-over-year fall in upstream earnings to $4,649 million.

However, despite the lower volumes for the quarter under consideration, Chevron’s production outlook remains one of the most robust in its peer group, with a number of major initiatives scheduled to come online during the next few years. Major start-ups during the last few months include the Bibiyana Expansion Project in Bangladesh, liquefied natural gas (LNG) project in Angola, deepwater Usan project and the Escravos Gas-to-Liquids facility in Nigeria, Caesar/Tonga project in the deepwater Gulf of Mexico, and the Chirag development in the Caspian Sea.

Amongst the major upcoming projects, Chevron’s Gorgon and Wheatstone natural gas initiatives in Australia are progressing well, while the Tubular Bells and Jack/St. Malo initiatives in the deepwater Gulf of Mexico remain on track for late 2014 start-ups.

Downstream: Chevron’s downstream segment achieved earnings of $1,387 million, considerably higher than the profit of $380 million last year. The results were buoyed by higher refinery margins on the back of lower feedstock costs and were supported by lower operating expenses.

Capital Expenditure, Balance Sheet & Share Repurchases

The second-largest U.S. oil company by market value after Exxon Mobil spent $9,410 million in capital expenditures during the quarter. Approximately 92% of the total outlays pertained to upstream projects.

As of Sep 30, 2014, the San Ramon, CA-based company had $14,215 million in cash and total debt of $25,709 million, with a debt-to-total capitalization ratio of about 14.1%. As part of the stock repurchase program, Chevron bought back $1,250 million worth of shares in the third quarter.

Zacks Rank

Chevron currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

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