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    Chevron Corp (CVX)

    Business Description

    Chevron Corporation is a global energy company that manages investments in subsidiaries and affiliates engaged in integrated energy and chemicals operations. The company is involved in exploring, developing, producing, and transporting crude oil and natural gas, as well as refining crude oil into petroleum products and manufacturing renewable fuels . Chevron's business activities are divided into two main segments: Upstream and Downstream, with the upstream segment being the primary contributor to its earnings .

    1. Upstream - Focuses on exploring, developing, producing, and transporting crude oil and natural gas. Includes activities related to liquefaction, transportation, and regasification associated with liquefied natural gas (LNG), and carbon capture and storage.
    2. Downstream - Involves refining crude oil into petroleum products, marketing crude oil, refined products, and lubricants. Also includes manufacturing and marketing renewable fuels, and transporting crude oil and refined products by various means, including pipeline and marine vessels.

    Q3 2024 Summary

    Initial Price$157.16July 1, 2024
    Final Price$149.70October 1, 2024
    Price Change$-7.46
    % Change-4.75%

    What went well

    • Chevron is committed to returning significant cash to shareholders, maintaining a share repurchase run rate of $17.5 billion , and has a strong balance sheet with AA credit rating and net debt below 12% .
    • Recent acquisitions like PDC Energy are exceeding expectations, delivering more than $1 billion in incremental free cash flow since acquisition and exceeding synergy guidance by over 30% . Chevron expects to hold production at around 400,000 barrels of oil equivalent per day through the end of the decade .
    • Major projects like TCO are progressing well, with complex commissioning activities ongoing and initial startup activities expected in the first quarter of 2025, which will contribute to increased production and cash flow growth .

    What went wrong

    • Regulatory challenges in California could negatively impact Chevron's downstream operations and future investments. Michael Wirth stated that it's "very tough to justify any new investments in that system, and it's only getting tougher" due to ill-conceived state policies ( ).
    • Potential oversupply in the LNG market may lead to lower margins for Chevron. Michael Wirth mentioned that "it doesn't look like 2025 is setting up to be a particularly tight market" because of healthy inventories and new supply coming online, affecting LNG prices ( ).
    • The Tengizchevroil (TCO) project still faces significant complex commissioning work, posing risks of delays or overruns. Michael Wirth acknowledged that "there is still significant complex commissioning work still ahead," and there's no "magic threshold" where the project is entirely de-risked ( ).

    Q&A Summary

    1. Hess Acquisition Uncertainty
      Q: Why not close the Hess deal now if confident in legal position?
      A: Chevron is proceeding with the Hess acquisition as per the deal structure, which includes conditions precedent like concluding any arbitration. Integration planning is going well, but they will execute the transaction as written. They acknowledge the timing is unfortunate but are confident in their legal position.

    2. $2–3 Billion Cost Savings Plan
      Q: How will you achieve the $2–3 billion cost savings?
      A: The cost savings program includes portfolio actions like asset sales (e.g., Canada, Alaska, Congo) and improvement initiatives across the organization. The first $2 billion comes from firm plans, while the additional $1 billion is an aspirational target from ongoing initiatives. Savings will be realized over the next few years, with full benefits by 2027.

    3. Future CapEx Plans
      Q: Is CapEx expected to decline materially in coming years?
      A: Chevron's CapEx has already reduced from $40 billion a decade ago to around $18.5 billion today. As major projects like TCO conclude, affiliate CapEx will come down next year. They plan to stay disciplined, with an unchanged guidance range of $14–16 billion, and will provide more details after completing their business plan.

    4. Sale of Canadian Assets
      Q: Why sell Canadian assets if adding long-cycle resources like Hess?
      A: The sale of the Canadian assets was opportunistic; the buyer made an attractive offer for both the Duvernay and AOSP assets. While Chevron values long-cycle assets, they continually high-grade their portfolio and were willing to divest non-core assets at fair value.

    5. Permian Basin Outlook
      Q: Can you discuss Permian growth and future focus?
      A: Chevron's Permian production remains strong, with new wells outperforming expectations. As they approach 1 million barrels per day next year, the focus will shift from growth (which has been around 15% CAGR) to maximizing free cash flow. Capital spending in the Permian is expected to decrease, emphasizing efficiency and productivity gains.

    6. Balance Sheet and Shareholder Returns
      Q: How does the balance sheet support shareholder returns amid volatility?
      A: Chevron maintains a strong balance sheet with net debt under 12%. They are comfortable using the balance sheet to support shareholder returns, including a share repurchase run rate of $17.5 billion. Their financial priorities focus on sustaining and increasing the dividend, reinvesting in organic projects, maintaining a strong balance sheet, and returning excess cash to shareholders.

    7. TCO Startup Progress
      Q: Is TCO startup largely de-risked now?
      A: Chevron is making great progress at TCO, delivering predictable commissioning and startup activities. While significant complex commissioning work remains, every quarter reduces risk. Key milestones have been achieved, and they're on track to begin startup procedures in the first quarter, with cost and schedule guidance unchanged.

    8. California Downstream Operations Impact
      Q: How are California policies affecting your refineries?
      A: Chevron criticized California's policies, stating they discourage investment and constrain supply, potentially leading to higher prices. While their California refineries are competitive and have operated for over a century, Chevron will continue to evaluate options but noted it's tough to justify new investments in that system.

    9. Gulf of Mexico Opportunities
      Q: How is technology unlocking new resources in the Gulf?
      A: Advancements like the 20,000 psi technology at the Anchor project open up opportunities in ultra-high-pressure fields. About 20% of Chevron's exploration portfolio requires such capabilities. They're also using ocean bottom node seismic and AI tools to improve exploration and development, indicating significant remaining potential in the Gulf of Mexico.

    10. Eastern Mediterranean Operations
      Q: How are current events affecting operations in the East Med?
      A: Safety is the first priority. Expansion projects at Tamar and Leviathan have faced delays due to contractor demobilization amid regional risks. Despite this, Chevron expects to complete these projects late next year and is meeting all supply commitments to customers.

    11. Turnaround Performance Improvements
      Q: Are turnaround successes at TCO and Gorgon repeatable?
      A: The improved turnaround performance is due to process enhancements, rigorous scope management, use of digital tools, benchmarking, and expertise sharing. For example, the Gorgon Train 2 turnaround was a 14% improvement in duration, and 8 out of 9 turnarounds met first quartile duration targets, indicating repeatable success.

    12. LNG Market Outlook
      Q: What is the LNG market outlook and your exposure?
      A: LNG demand is growing, but high inventories suggest that 2025 may not be tight. Chevron's LNG portfolio is over 80% contracted, primarily on oil-indexed pricing with long-term contracts to North Asia. They have less than 20% spot exposure, mainly from West Africa.

    13. DJ Basin Potential
      Q: Are there opportunities for scale in the DJ Basin?
      A: Chevron is pleased with the DJ Basin's performance and integration of acquisitions. They have become the largest operator there, with production expected to remain at 400,000 barrels a day through the end of the decade. While further acquisitions aren't a priority, they focus on driving value from the asset.

    14. Chemicals Business Performance
      Q: What's driving the improvement in the chemicals business?
      A: Polyethylene chain margins have strengthened over the year due to supply disruptions and steady demand growth. Chevron Phillips Chemical (CPChem) benefits from competitive ethane-based feedstocks. Despite previous market oversupply, margins are improving, and long-term fundamentals are viewed positively.

    15. Cost Reductions and Relocation
      Q: Does relocating to Texas affect cost reductions?
      A: The relocation is not seen as a threat to cost reductions. Chevron is thoughtfully migrating work over time, utilizing technology, and considering different locations, including global capability centers. The goal is to improve efficiency without disrupting operations.

    16. Permian Non-Operated Interests
      Q: Is there a two-speed system in Permian operations?
      A: Chevron has seen strength across all three components of their Permian business: operated, joint venture, and royalty interests. While performance varies, there's no significant variation to suggest a two-speed system among operators in the basin.

    Key Metrics

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    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Upstream12,31118,63110,858--21,95021,50822,060
    - United States-156149-595120153138
    - International-01-2101
    Downstream36,50139,62141,032--38,33142,11339,655
    All Other3015632--121153139
    Total Revenue48,84247,21651,92248,933196,91346,58049,57448,926
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States29,12129,16633,17632,814124,27731,52732,92231,035
    - Upstream-9,87610,633-43,80510,783--
    - Downstream-19,36621,028-78,05818,091--
    - All Other-01-21--
    International30,30229,24231,66230,659121,86528,87530,85230,819
    Intersegment Elimination US-7,546-8,272-9,192-10,552-35,562-10,389-10,596-9,975
    Intersegment Elimination Int-3,035-2,920-3,724-3,988-13,667-3,433-3,604-2,953
    Total Revenue48,84247,21651,92248,933196,91346,58049,57448,926
    KPIs - Metric / PeriodFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Net Crude Oil & NGL Production**U.S.: 877 , Intl: 849U.S.: 916 , Intl: 827U.S.: 1,028 , Intl: 803U.S.: 1,164 , Intl: 851-U.S.: 1,130 , Intl: 838U.S.: 1,132 , Intl: 823U.S.: 1,156 , Intl: 834
    **Net Natural Gas Production**U.S.: 1,742 , Intl: 5,7755,480U.S.: 2,275 , Intl: 5,616U.S.: 2,604 , Intl: 5,661-U.S.: 2,657 , Intl: 5,610U.S.: 2,643 , Intl: 5,378U.S.: 2,694 , Intl: 5,550
    **Net Oil-Equivalent Production**2,9802,9593,1463,392-3,3463,2923,364
    **Refinery Crude Unit Inputs**U.S.: 890 , Intl: 628U.S.: 962 , Intl: 623U.S.: 961 , Intl: 625U.S.: 923 , Intl: 629-U.S.: 878 , Intl: 651U.S.: 900 , Intl: 650U.S.: 995 , Intl: 628

    Executive Team

    NamePositionStart DateShort Bio
    Michael K. WirthChairman of the Board and CEOFebruary 2018Michael K. Wirth is the Chairman of the Board and Chief Executive Officer of Chevron Corporation. He joined Chevron as a design engineer in 1982 and has held various senior management and executive positions .
    Pierre R. BreberVice President and CFOApril 2019Pierre R. Breber has been serving as the Vice President and Chief Financial Officer of Chevron Corporation since April 2019. He will be succeeded by Eimear P. Bonner on March 1, 2024 .
    Mark A. NelsonVice ChairmanFebruary 2023Mark A. Nelson is the Vice Chairman at Chevron Corporation. He has held various executive roles, including Executive Vice President of Strategy, Policy & Development .
    A. Nigel HearneExecutive Vice President, Oil, Products & GasOctober 2022A. Nigel Hearne is the Executive Vice President, Oil, Products & Gas at Chevron Corporation. He previously served as President of Chevron Eurasia Pacific Exploration & Production .
    Eimear P. BonnerVice President and CFO (effective)March 1, 2024Eimear P. Bonner has been serving as Vice President at Chevron since August 2021 and will assume the position of Vice President and Chief Financial Officer effective March 1, 2024 .
    Jeff B. GustavsonVice President, Lower Carbon EnergiesAugust 2021Jeff B. Gustavson is the Vice President of Lower Carbon Energies at Chevron Corporation. His primary area of responsibility is Lower Carbon Solutions .
    Balaji KrishnamurthyVice PresidentOctober 2022Balaji Krishnamurthy is a Vice President at Chevron Corporation. He has held various roles, including Vice President of Strategy & Sustainability .
    Rhonda J. MorrisVice President and Chief Human Resources OfficerFebruary 2019Rhonda J. Morris is the Vice President and Chief Human Resources Officer at Chevron Corporation. Her primary areas of responsibility include Human Resources, Diversity, and Inclusion .
    R. Hewitt PateVice President and General CounselAugust 2009R. Hewitt Pate is the Vice President and General Counsel at Chevron Corporation. His primary areas of responsibility include Law, Governance, and Compliance .

    Questions to Ask Management

    1. With net debt ticking up in Q3 and considering the volatile commodity markets, how do you plan to balance continued shareholder returns with maintaining a strong balance sheet, especially if commodity prices decline over the next few years?

    2. Given the advancements in ultra-high pressure and temperature technology in the Gulf of Mexico, can you quantify the potential upside to your longer-term production and resource opportunities, and how might this impact your production targets?

    3. In light of the challenging regulatory environment in California leading to refinery closures, have you considered shutting down capacity in the state, and how do you anticipate these developments will affect your downstream profitability and operations in the region?

    4. As major capital projects conclude, such as those in Kazakhstan, do you anticipate a significant decrease in capital expenditures over the next 2-3 years, and how will this influence your growth strategy and free cash flow generation?

    5. With complex commissioning work still ahead for the TCO start-up and recognizing the risks involved, can you provide specific milestones that will indicate when the project is largely de-risked, and when investors can expect reliable production ramp-up?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateJanuary 25, 2023
    End Date/DurationNo fixed expiration date
    Total additional amount$75 billion
    Remaining authorization$53.1 billion as of September 30, 2024
    DetailsThe program took effect on April 1, 2023. It aims to return capital to shareholders, improve financial metrics, and signal management's confidence in the company's future prospects.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024
    • Guidance:
      1. Share Repurchases: $4 billion to $4.75 billion .
      2. Production Growth: Full-year average expected at the top end of 4% to 7% .
      3. Affiliate Dividends: Around $1 billion .
      4. Proceeds from Asset Sales: About $8 billion before taxes .
      5. Capital Expenditure (CapEx): $14 billion to $16 billion .
      6. Structural Cost Reductions: $2 billion to $3 billion by the end of 2026 .
      7. Permian Basin Production: 1 million barrels per day next year .
      8. Eastern Mediterranean Projects: Completion expected late next year .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      1. Production Growth: Full-year about 15%; Q4 average around 940,000 barrels per day .
      2. Capital Expenditures (CapEx): Organic CapEx at $3.9 billion for the quarter; targeting close to $5 billion .
      3. Maintenance and Turnarounds: Heavier-than-usual maintenance in Q3 .
      4. Working Capital: About half to unwind in the second half, primarily in Q4 .
      5. Share Repurchases: $17.5 billion annual guidance rate .
      6. Affiliate Dividends: Around $1 billion in Q3 .
      7. Asset Sales: Aligned with full-year guidance .
      8. Free Cash Flow Growth: 10% growth expected .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      1. Capital Spend: Long-term around $16 billion; current year $15.5 billion to $16.5 billion .
      2. New Energies Investment: $10 billion from 2022-2028 .
      3. Production: Worldwide up over 12%; U.S. up 35% .
      4. Share Repurchases: $17.5 billion annual rate post-Hess vote .
      5. Free Cash Flow from TCO: $4 billion in 2025; $5 billion in 2026 .
      6. Affiliate Dividends: $1 billion to $1.5 billion in Q2 .
      7. Permian Basin Production: Exit year around 900,000 barrels a day .
      8. Cash Balance: Targeting $5 billion .
      9. Divestment Program: 1% to 2% of capital employed .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Production Growth: 4% to 7% increase .
      2. Capital Expenditures (CapEx): Unchanged from December budget .
      3. Affiliate Dividends: Estimated around $4 billion .
      4. Share Repurchases: $17.5 billion annual rate post-Hess vote .
      5. Permian Basin Production: Full-year around 770,000 to 780,000 barrels per day .
      6. TCO Project: First phase startup in Q2 .
      7. Dividend Growth: 8% increase .

    Latest news

    Recent developments and announcements about CVX.

    Financial Actions

      Dividend Policy

      ·
      Oct 23, 2023, 12:00 AM

      Chevron Corporation (CVX) has announced a significant change in its dividend policy. The company has coordinated its quarterly dividend payments with Hess Corporation to ensure that shareholders do not receive double dividends or miss any dividends during the merger process. Specifically, Chevron has committed to declaring and recording quarterly dividends no later than five business days following the one-year anniversary of the corresponding quarter of the previous year. This coordination is part of the merger agreement between Chevron and Hess .