Chevron's (CVX) stock took a 3% hit on November 2 following the release of the company's third quarter earnings. The energy company had a weak quarter as earnings fell 33% year-over-year to $5.2 billion with declines in both upstream and downstream earnings. However, most of the decline can be attributed to maintenance related activities and extraordinary events such as Hurricane Isaac and the fire at the company's refinery in California.

Upstream performance hit by lower prices and production

Upstream income fell 17% year-over-year, impacted by lower price realizations on crude oil and natural gas, and a 4% decline in net oil-equivalent production. The production declines were primarily due to maintenance shutdowns in Kazakhstan and the U.K.

Net production for the year is expected to be slightly lower than original projections owing to the temporary ban on operations at the Frade Field in Brazil and a delay in the ramp-up process for the LNG project in Angola. The Brazilian government recently upheld a ban which will keep the Frade Field shut for the near term.

We expect net production to recover over the next few quarters considering that declines from maintenance downtime are only temporary and assuming no further weather related disruptions. In the long term, we believe that the company's cash reserves, currently at $21 billion and growing, can support strong growth in upstream exploration and production. Chevron currently has a number of projects in the ramp up phase, including projects at Thailand and Angola, and has also increased its reserves through strategic transactions across the globe.

The downstream segment underperformed as well with earnings declining more than 65% on a year-over-year basis. Unlike its peers, Chevron was unable to benefit from unusually high refining margins this quarter. A fire at the Richmond refinery in California, which forced the company to shut down the plant and operate other plants at reduced rates, led to a decline in refinery throughput. Hurricane Isaac also played a part disrupting operations at the Pascagoula refinery in Mississippi.

We currently have a Trefis price estimate of $115 for Chevron, which is around 5% above the market price.