Chevron Corporation (CVX) on Q1 2023 Results - Earnings Call Transcript
Operator: Good morning. My name is Katie, and I will be your conference facilitator today. Welcome to Chevron's First Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' remarks, there will be question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I will now turn the conference call over to General Manager of Investor Relations of Chevron Corporation, Mr. Jake Spiering, please go ahead. Jake Spiering : Thank you, Katie. Welcome to Chevron's first quarter 2023 earnings conference call and webcast. I’m Jake Spiering, General Manager of Investor Relations. Our Chairman and CEO, Mike Wirth, and CFO, Pierre Breber, are on the call with me. We will refer to the slides and prepared remarks that are available on Chevron’s website Before we begin, please be reminded that this presentation contains estimates, projections, and other forward-looking statements. Please review the cautionary statement on Slide 2. Now, I will turn it over to Mike. Mike Wirth : Chevron delivered strong financial results again last quarter, the seventh consecutive quarter with return on capital employed greater than 12%. This enabled another record for cash returned to shareholders while maintaining a very strong balance sheet. Since our investor day two months ago, we’ve remained focused on executing our plans. Achieving important milestones on our major project in Kazakhstan, continuing to build activity levels in the Permian, positioning Bayou Bend to be one of the largest carbon storage projects in the United States, and safely and reliably delivering oil, products and natural gas that help power the global economy. Next week, we’ll publish our Corporate Sustainability Report. I encourage you to review it on our website as we provide updates on the ESG topics that matter to our business and our stakeholders. In closing, while commodity markets remain uncertain, our approach is unchanged: capital and cost discipline applied to advantaged assets in both traditional and new energy businesses and steady returns of cash to shareholders. You can see that consistency in our actions and our results. Now to Pierre to discuss the quarter. Pierre Breber : Thanks, Mike. We reported first quarter earnings of $6.6 billion, or $3.46 per share. Adjusted earnings were $6.7 billion, or $3.55 per share. We had one special item this quarter related to changes in the energy profits tax in the United Kingdom. The appendix of this presentation contains a reconciliation of non-GAAP measures. Strong operating cash flow enabled Chevron to deliver on its financial priorities during the quarter a 6% per share dividend increase, higher CapEx within budget, net debt ratio under 5%, share repurchases at the top of our prior guidance range. Adjusted first quarter earnings were up over $200 million versus last year despite 20% lower oil prices. Adjusted Upstream earnings were lower mainly due to realizations and adjusted downstream earnings increased primarily due to higher refining margins. Both segments benefitted from a change in timing effects. Higher interest income and lower accruals for stock-based compensation decreased all other charges. Compared with last quarter, adjusted earnings were down $1.1 billion. Adjusted Upstream earnings decreased primarily due to lower realizations. Other items include the absence of last quarter’s dividend withholding tax at TCO and lower exploration and transportation expenses. Adjusted Downstream earnings were essentially flat. Lower margins and volumes were offset with higher chemical earnings and other favorable items including trading results. Lower accruals for incentive-based compensation decreased All Other net charges and also benefitted the operating segments First quarter oil equivalent production was down about 80,000 barrels per day from last year due to the expiration of a contract in Thailand and the sale of our Eagle Ford asset. This was partially offset by growth in the Permian. We expect 2023 production growth in the Permian to be back-end loaded as wells put on production, POPs increase across both operated and non-operated areas. We expect our royalty production to be roughly flat. As discussed during our Investor Day, we’re increasing activity in New Mexico. All four company-operated rigs added this year, one each quarter, will be in New Mexico, leading to more POPs expected in the second half of the year and into 2024. We also continue to be active in Texas. Last year, about half of our company-operated production was in the Delaware Basin in Texas with the remainder split about evenly between the Midland Basin and New Mexico. More than half of our non-operated production is with five major operators in large, contiguous positions in core areas with multiyear development programs, where we have visibility to capex and execution schedules and a royalty benefit compared to the operator. The balance is with dozens of other operators where we have a little less visibility, but similar predictability from greater diversification. More than half of our royalty production comes from the Pecos River area in the heart of the Delaware Basin. The balance of our royalty position is in the remainder of the Delaware and Midland Basins, also with well-known operators. In summary, Chevron has a large, diverse position in the Permian with a unique royalty advantage where we learn from our own operations and from others. Now, looking ahead. In the second quarter, we expect planned turnarounds at Gorgon and in the Gulf of Mexico along with downtime at a FSO in Thailand and a number of planned refinery turnarounds. Also, we expect share buybacks to increase to a $17.5 billion annual rate. In summary, 1Q was another quarter with strong financial results, continued capital discipline, and a steady return of cash to shareholders. We’re confident that consistent and straightforward management, through commodity cycles, will create value for stakeholders. Back to you, Jake. Jake Spiering : That concludes our prepared remarks. We are now ready to take your questions. Please limit yourself to one question and one follow-up. We will do our best to get all your questions answered. Katie, please open the lines. Operator: Thank you. Our first question comes from Devin McDermott with Morgan Stanley. Devin McDermott: Hey, good morning. Thanks for taking my question. Jake Spiering : Good morning, Devin. Devin McDermott: Good morning. So there were some helpful detail in the slides and the remarks on the breakdown of permeant operations. If I look at the quarter, your volumes did fall a bit sequentially in 1Q versus 4Q. I wonder if you could just talk in a bit more detail about some of the drivers there, how things are going as you ramp New Mexico activity. And that's typically the confidence that you have in that back-half weighted production ramp. Mike Wirth : Yeah, thanks. Thanks, Devin. Pierre tried to show a little more detail, including breaking out COOP JV, royalty, talking about drilling activity and feed drilled et cetera. So glad that that was helpful. First quarter performance was a function of really the fact that NOJV and royalty production, which as you can see from that chart is, a meaningful portion of our overall production, was down a little bit from fourth quarter of last year. Now, this gets a little a little lumpy due to how it gets reported by partners. And so, over time, it's trended up, particularly the NOJV piece. But it was a little lumpy, and it was down first quarter versus fourth quarter last year, COOP production was mostly flat from 4Q of last year to first quarter this year. In terms of the full year outlook, on Slide 9, we show full year outlook, it's about 770,000 barrels a day. '22 was a little bit over 700 -- 707, I think, Our COOP production will grow in the mid-single digits. NOJV, we expect to grow in the mid-teens, and royalty is roughly flat year-on-year as our expectation. So that kind of lays out first quarter and we still think that the guide would give us appropriate as Pierre said, back-end loaded. So, we'll be updating each quarter on that. Devin McDermott: Got it makes sense. Thanks. And my follow up is on TCO. And it's exciting that we're now less than a year away from startup there and back at the Investor Day, you noticed that you had shifted to commissioning and the startup work for WPMP. I was wondering if you just give us an update on how things are going their latest expectations on timing. And then also the key milestones that we should be keeping an eye out for the balance of this year ahead of startup. Mike Wirth : Yeah, absolutely. I actually was in Kazakhstan earlier this month. I had a chance to meet with the President of the Republic, some other senior officials, And also spent time down at Tengiz and visited the job site, talk to both people from our construction team, people from the commissioning team, people from operations as we're preparing for startup. And I'll tell you, it looks a little less like a construction site a little bit more like a plant than it did the last time I was down there. So the progress is very obvious. The headline I'll give you is there's no change to our cost or schedule guidance. We expect WPMP startup to begin by the end of this year. Now that's a conversion of the field from high pressure to low pressure. So that will take some time as we take all the metering stations and field infrastructure down to low pressure, but that will still begin by the end of this year. And the startup of the future growth projects, the portion that adds 260,000 barrels of oil production that will begin by mid next year. Both of these require a series of turnarounds and tie-ins and things like that. So it's quite a quite a complex set of activities to get us to the point where we've got everything online. But there's a lot of work behind us. While I was there, we achieved mechanical completion on the third-generation sour gas injection facility, which was ahead of schedule. And there were a number of milestones that I mentioned that we talked about at the Investor Day that that we've achieved. So we completed tie-in of the fuel gas system so the first gas turbine generator we fired that generator so we know that it's working. In the second quarter in terms of milestones to watch for, we're working to commission boilers, steam system, other utilities that are required for the startup of the pressure boost facility, which is the key driver of that conversion from high pressure to low pressure field operations to enable sustained well deliverability. In the third quarter, we expect mechanical completion of the future growth project. And then, as I said, will begin startup activities on the field conversion to low pressure by the end of this year. So those are some of the key milestones. And, like I say, a lot behind us, but there's still a lot of complex work ahead. We'll be updating you on it every quarter. Devin McDermott: Good to hear. Thanks, Mike. Mike Wirth : All right, Devin. Thank you. Operator: We'll take our next question from Neil Mehta with Goldman Sachs. . Neil Mehta : Yeah, thank you so much, Mike and Pierre. The first question is just around the LNG portfolio, a lot of volatility in the global gas markets over the course of the last year, just be curious how you guys are seeing the outlook and any updates on your portfolio, particularly down in Australia, where recognized you're going to take into maintenance, but seems like it's operating pretty well. Mike Wirth : Sure. So -- overall, it's been a bit of a wild ride in gas markets over the last year. And we've seen prices are extraordinarily strong. If you go back two years ago, they were extraordinarily weak. And they've certainly moderated now, as we've had warmer weather in the northern hemisphere, through the wintertime, as the situation in Europe has, I think become a little more stable. Certainly, inventories both in Europe and in the U.S. are much healthier than people were concerned about it at one point in time. And so, we're into a market that still is perhaps strong by historic standards, but certainly not nearly as strong as what we saw. Operations that Gorgon and Wheatstone are running very well. We had a record number of LNG cargoes go out of Australia last year. It was 10% better than the best year we've ever had. Reliability was first quartile for the two facilities. And so we feel good about that. We've started -- or this year, we'll start the second turnaround cycle, which is a four-year cycle to turn trains around Gorgon Train 1 will have a major planned turnaround in the second quarter of this year. And the course, we're working on the next stage of field development to continue to keep the field full with wells drilled and in startup activity, time activity, et cetera underway, on the next phase of the gas developments to bring that into the facility. So things in Australia are good from an operational standpoint and a reliability standpoint. More broadly speaking, we continue to look at opportunities in our LNG portfolio beyond Australia. Certainly, we've talked at some length about the Eastern ramp. So belabor that, but looking at concepts and expect to select a concept on the Leviathan expansion, by the end of this year. And an Equatorial Guinea we're looking at opportunities to bring additional gas resources in through existing infrastructure. So continue to be very focused on what we can do to add value in our LNG business, but to do it in a way that's returns accretive. Neil Mehta : That's great. And then the follow up is, is just on return of capital. And I think you guys have been pretty clear about the range that we should be thinking about from a buyback perspective. Just on dividend growth, just talk about how do you expect that to track relative to your free cash flow per share expectations? Mike Wirth : Yeah, I think we have been clear on buybacks, so I won't spend time on that. On dividends, I would say our track record should speak for itself. Of course, these are decisions that are made by the board each year, but we've got 30 -- 36 consecutive years now of higher payouts over the last five years. Our dividend growth per share has been double that of our closest peers. So we've sustained this not over the long haul, but also in the short term through the volatile period of time that we've seen. Our dividend track record, I think stands very well. Reiterate our four financial priorities, the first of which is to sustain and grow the dividend, as I just mentioned, 6% increase earlier this year in a compound annual growth rate of 6% over the last 15 years. So, I think -- again, I'll say our track record on the dividends speaks for itself. I think Pierre mentioned that the quarter we just closed included the highest ever cash distributions to shareholders for the fourth consecutive quarter that we can that, and we're very mindful of, continuing to deliver cash in a in a predictable and consistent manner back to shareholders through both of those vehicles. Neil Mehta : Yep. Thanks, Mike. Mike Wirth : Okay, Neil, thank you. Operator: We'll go next to Roger Read with Wells Fargo. Roger Read: Yeah, thank you. Good morning. Maybe come back to the Permian a little bit. I know you've been providing us a lot more detail on things. And I appreciate that detail for the overall production breakdown in the U.S. But looking at the Permian, the Chevron operated portion versus your JV non-op, is we think about some of the snags that have been hit over the last couple of quarters, where have been the biggest problems? Is it been in the operated or the non-operated? And then as you think about correcting those over the next couple of quarters, how much of that is Chevron-controlled versus partner? Mike Wirth : Yeah. So I will speak to our operated operation, because I really can't speak on behalf of the others. They should speak on behalf of their operations. We certainly learned from those. But, we spent a pretty good amount of time at the Investor Day, talking about the learnings on a drill been uncompleted wells that had sat for a long time talking about the prior basis of design for the wells, including spacing and profit loading, talking about multi-venture development. And we've learned a lot from our own operations, and those learnings are augmented by the things that we learned from others. And so we talked about more single bench development, more activity. In New Mexico, we continue to be very focused on driving strong returns, and not optimizing to production or some other ther metric. Just to give you a little bit more guidance, Roger for this year, in terms of how to think about it. We expect royalty production to be roughly flat, in the neighborhood of, a little bit over 100,000, maybe 110,000 barrels a day. Most of that comes from the Pecos River area where we've got big operators, Oxy's largest operator in that area, but others that are well known operators in that area. And then we've got some that comes in from the Midland as well from big operators where there's a lot of visibility into what their plans are. Our COOP production growth, we expect to be mid-single digits for the full year. Maybe a touch higher than the midpoint of single digits and expect roughly 190 wells to be put on production this year, which is down a little bit from last year, maybe 10% from last year when our COOP production increased 35,000 barrels a day. We've got growth in the Texas side of the Delaware earlier in the year, the New Mexico side, later in the year, which follows the chart Pierre showed you with drilling lateral feet. And then in the NOJV, the growth is higher. It's in the mid-teens for the full year. The gross number of POPs in our NOJVs are expected to be up about 15% year-on-year. And it's interesting, our net POPs actually increased more than the gross because we have relatively high working interest and a significant royalty advantage in the non-ops. And so a 15% increase in gross POPs actually translates into more production than you might presume. We've got really good visibility into the execution schedule we've received more than three quarters of the AFEs for this year's activity. And operations have actually begun on more than three quarters of the NOJV wells that we expect to be popped this year. So it's a mix. We've got a really strong, but also a bit of a complex portfolio because of these three different contributors and we're continuing to hold the guidance, as I said earlier, at about 770 for full year. Roger Read: No, that's great. I appreciate that. And a follow-up question, I suspect, is for you, Pierre. Working capital, obviously tends to be a draw in Q1. You've got the sounds like a decent level of planned maintenance in Q2. So just any thoughts on how we should look at overall cash flow generation Q2, maybe rest of the year in terms of the cadence? Pierre Breber : Well, in terms of working capital, Roger, the first quarter, as you said, was a build in working capital draw on cash, and that was primarily inventory related. If you saw last year, we had draws on working capital that was primarily through taxes payable. And you'll see in the second quarter, some of those payments happening. We try to give everything excluding working capital because over the course of time, that tends to zero out and there's a pattern, but there's some variability around it. So that's the guidance I would give on you. In terms of free cash flow, it depends on -- and cash from ops depends on commodity prices and margins, and we gave a lot of that during our Investor Day and some upside in downside cases. But in terms of working capital, you'll see timing effects. We try to look through them and exclude them. And then next quarter, you should expect some large tax payments, which will be obviously a draw on cash. Roger Read: Okay, great. Thank you. Operator: We'll take our next question from Paul Cheng with Scotiabank. Paul Cheng : Hey, good morning, guys. Have been the kind of project due to the characteristic that we have different returns and different payback period criteria that I think management put. So for your loan carbon investment, not those that for the own emission mitigation activity, but that in terms of like CCUS as a new business. For that kind of business that what is the minimum internal rate of return and payback period that you sign in order for you to sanction the projects. Mike Wirth : Yeah, Paul. Look, the reality is these are brand-new businesses. And we've got a lot of confidence in the returns and payback periods that we expect out of businesses we've been in for many decades and understand very well in well-established markets. These are businesses that don't exist today. They are in part enabled by a government policy the rules of which are not yet fully written and the durability of which we need to ask ourselves questions about as we commit capital to it. So they're different. They're very different. Our goal over the long term is to get similar returns out of these businesses as we get out of our core business. And so that would be double-digit returns. In the mid-term to the near term, we're going to have to go into some of these things that offer high growth and opportunity with our eyes wide open, but also understand that as we establish them in the early days, we may not see the returns that we expect in the fullness of time. So we make big investments. Our expectation is over the life cycle of these investments, we're going to deliver those kinds of returns. But we're also mindful of the fact we've got to develop technology. We've got to scale these things. We've got to help markets mature. We've got to build operational experience. We've got to build risk management experience, supply chain and customer capabilities in these businesses. And so in the near term, we'll be understanding of the fact that the returns in the short term will probably look different than our long-term expectations but we won't go into things that we don't believe offer the long-term prospect for returns, which is why we have steadily avoided more well-established sectors like wind and solar, where we could go into those today because the risks are better defined, but we also understand the returns. And so we were just trying to do these kinds of projects, we would go into those, but they don't offer the kinds of returns we expect out of the things that we're working on. Paul Cheng : And second question is that your largest U.S. competitor, just announced that they're going to push more aggressively into trading and establish a single trading organization and think that that's quite a fair amount of opportunities out there in the market that they can capture the sensory taking maybe that someone of a rule book from a payback from Chevron. I think Chevron has always been a little bit more conservative on that. So do you think that really the opportunity for a company similar to Chevron that have a lot of global reach and more of a physical ones and have a knowledge edge over others? So -- is there an opportunity that we may be missing that for Chevron? Mike Wirth : Well, Paul, what I would say is I think maybe your perception is a little bit miscalibrated from what I would describe. We have always had a global trading organization for many, many years, I used to run it. Pierre used to run it. And so we're in active trader. We trade in a certain way. And I'll give you the three-word kind of overarching description, we flow, optimize and trade. So the first role of our commercial organization is to ensure our barrels and molecules flow to the market. The second is to optimize assets, ships, market positions, market knowledge and be sure we get the most value out of our system that we possibly can. And then the third responsibility is to trade. And we do third-party training. We do what we call Quad 4 trading. On a regular basis, we make money at it, and we have very talented people in our organization to do. We also have good risk management systems to ensure that we understand what we're doing. So I wouldn't describe us as not being a trader. And I don't know if there's a definition, I think you used the word conservative. Look, we're a trader, but we do it in the order that I just described and have done it for a long time on a global basis. So it's a contributor to our earnings, and we continue to look to grow that part of our business. Pierre Breber : The only thing I would add, Paul, to Mike's answer is shareholders and investors don't own Chevron or like companies for trading earnings. They tend to be volatile. I think the multiples on trading earnings historically have been very low. In fact, most of the large trading houses or private company. So Mike described exactly what our strategy is it works within the framework of a resource company and refining and petrochemicals company where investors are owning us for safely and reliably delivering energy having the commodity price exposure. And yes, if we can enhance that with trading results, that's great, but we're not going to lead with trading. Thanks, Paul. Paul Cheng: Okay. Thank you. Operator: We'll take our next question from Sam Margolin with Wolfe Research. Sam Margolin : Good morning. Thank you. This one is just a clarification question on something you said about the Permian because I think it's important. In the NOJV section, because you stack royalties with the NOJV acreage, your growth rate in the NOJV portion actually exceeds the growth rate of our partners as they reported. Is that -- that's the correct interpretation, right? That's what we're trying to communicate. Mike Wirth : Yeah. I mean our -- because we not only get our working interest production out of that, but because we also have -- and we have relatively high working interest in most of our -- these ventures. So it's not dissimilar to the working interest of the operator in most cases. But then we also have royalty advantage and we -- and we account for that or we report that to you through that NOJV. What we describe as royalty barrels are pure royalty. We've got no capital. We've got no working interest. We're just collecting royalty as the landowner. But you're correct in your interpretation there, Sam. That is why our NOJV is growing a little faster than our co-op production for the same levels of activity. Sam Margolin : Okay. And then just as a follow-up. This is on capital allocation and I understood that you have the range out there in the buyback. The range is pretty substantial, and there is a decision to make right now about where to be within the range about whether to preserve cash for an opportunity that might come in the downturn, if that's what looks like it's on the horizon or whether to stay at the top end because we're in sort of a market equilibrium in the commodity environment, and you feel good about the pace. And I'm not asking you to predict the future, but it would be great to sort of hear your thoughts directionally about the value of kind of preserving cash on the balance sheet for any day or maintaining a faster pace? Thanks. Mike Wirth : Yeah, I'm going to invite Pierre to say a couple of words. But Sam, we tried to lay out a couple of cases at Investor Day that showed you in two different price environments, what our capacity was to operate and be within the range and with a low breakeven to cover our CapEx and dividend with a lot of surplus cash already on the balance sheet and then with the very low low-debt levels that we have. We've got plenty of capacity. Pierre, maybe you can just give a thumbnail recap on the scenarios to booking them for Sam. Pierre Breber : Yeah. In our Investor Day, we looked at the high case and low case scenarios and our guidance right now is towards the high end. And let me just first be clear that we don't intend to hold $15 billion plus of cash on our balance sheet. We can run the company at $5 billion, and this is surplus cash. And this is cash that is temporarily on the balance sheet. It will be redistributed and redeployed to shareholders over time depending on the scenario and the price of both scenarios had us working down that surplus cash because it's economically inefficient for us hold it, and it's not our cash, it's our shareholders' cash. We want to return it through the cycle in a steady way, not pro-cyclically. So that's why it's accumulating. We've paid off all our debt economically, but it's a timing effect. And we showed certainly in the low side case which averaged about a $60 Brent that we could continue buybacks near the low end of the range, and we can do that on by taking surplus cash down. And then also using some of our excess debt capacity because we're well below our 20% to 25% net debt ratio. So we'd want to work towards that low end of that guidance range of 20%, again, to get to a more efficient capital structure. In terms of keeping cash for any day or strong we're always going to maintain a strong balance sheet. We've been in this business for decades and decades. We know the good times don't last. We know that prices are cyclical. We want to manage that volatility for our shareholders. So our shareholders don't have to worry about the commodity price because they're going to get the dividend that Mike talked about, that's been growing for 36 consecutive years. That's grown 6% annually for 15 years. They're going to get that. And then through a cycle, as we approach the cycle, and we're looking at the cycle coming up here, additional cash in a steady way, right now, about 5% of our shares outstanding through the form of a buyback. And so that's how we're planning to manage the volatility for our shareholders. And we've talked about if M&A is implied in your question that we shown that we tend to use equity for M&A because there is -- commodity prices are volatile. It creates a more stable deal structure. So our balance sheet will always be strong enough to enable us to not only manage commodity prices, but also make sure we're positioned to do what we need to do. And I don't need to remind you that we were the first to do a transaction coming out of COVID when we announced the acquisition of Noble Energy, and then we followed a year or so later in acquired Renewable Energy Group. Thanks, Sam. Sam Margolin: Thank you. Operator: We'll take our next question from John Royall with JPMorgan. John Royall : Hi, good morning. Thanks for taking my question. So can you talk about the general demand trends you're seeing within your system? Are you starting to see any signs of weakness on the demand side? And if the answer is no, just curious on your views on what's happened to spot refining margins globally and what seems like still a relatively tight market. Mike Wirth : Yeah. So John, a couple of thoughts, I guess. I'll just go by the product commodities. I mean gasoline demand is essentially back to pre-pandemic levels globally. Obviously, there are regional variations in this. We're sitting in California here on this end of the call. We've had a very wet winter. And so the first quarter reflects an unusually wet season on the West Coast. In Asia, we see demand coming back, right, as economies continue to continue to open up and mobility has increased, et cetera. But broadly speaking, gasoline flat. Diesel had kind of carried the complex through COVID and global demand has been at pre-pandemic levels for a while now. First quarter demand in '23 is a touch lower than it was in first quarter of '22. Could be an indicator of the beginning of some economic slowdown, but it's certainly, I think, premature to conclude that. But diesel is maybe not leading the parade quite as strongly as it had been for the last couple of years. Jet demand continues to grow. And it's still below kind of prepandemic levels. China is the place, obviously, as everybody has been paying attention to domestic travel up to nearly 90% of pre-COVID flights in and out of the country still well below that. And we see flights being scheduled. You see indicators that suggest travel will grow. You listen to the airlines, and that certainly seems to be what they anticipate, but that's in progress. So that's a kind of a quick look across the product slate. I think margins reflect a couple of things. One, a year ago, we were in a period of recovering economies and we're coming out of a period of rationalizing refining capacity around the world. And you can go to any part of the world and find refineries that had shut down that perhaps people expected would close one day, but it happens relatively quickly. And at the same time, you saw big growth projects that had been deferred because of the uncertainty relative to COVID a year later here. You don't see refineries closing at the same rate. We've seen refinery startups in the Middle East. We've seen projects here in the U.S. and in Asia as well. So refining capacity coming into the system demand has moderated a little bit. Margins have come down. They're still stronger than historic margins if you look out over a longer period of time, but trending back down towards mid-cycle. Pretty strong in the U.S., maybe under a little more pressure in Asia, but you got to think about the feedstocks in Asia, where they're coming from, how they're priced and how those markets are working. So I don't see any big warning signs flashing, but certainly, we're paying close attention to it. John Royall : Very helpful, Mike. Thank you. And then maybe sticking with the downstream, and you mentioned California. Can you just talk about the new regulations in California around the potential for excess profit penalties not sure if that's exactly how to refer to it? But how much does that impact how you think about refining in California and your position in California and maybe the expected impacts on the broader market there? Mike Wirth : Yeah. I'll talk about it, sure. So the bottom line is this is now into a rule-making process. There's no impact right now. And it's into kind of a bureaucratic phase. I think implementation is likely to take quite a while, and it's hard to say exactly how it plays out. What started as an effort to create a windfall profit tax was unsuccessful because you need two thirds of a vote in the legislature for new tax in California. That then modified into some other forms and ended up moving into the Energy Commission, where there will be a group established that will gather a lot of data and try to assess the profitability of industry again some standard, which I think is yet to be fully articulated. So this is going to take some time. It could potentially result in in some sort of a fine or a penalty for margins or profits above a level, but I can't tell you how it's going to play out because it's -- there's a lot of work to be done there. I guess the things that I would say are pretty predictable are maybe two. One, there are substantial new reporting requirements, and there's a lot of data we're going to have to produce. We're happy to do that. We'll work closely with the Energy Commission to make sure we get them the information that they're requesting. And then the second is, I don't think this does anything to encourage investment or new supply, which is really what's needed in a marketplace commodity markets to bring prices down on average over time. In fact, I think it runs the risk of doing the opposite of discouraging investment of decreasing supply over time, which if demand does not moderate, will tend to exacerbate volatility and over time probably result in, on average, higher levels of price. So that's about all I know about it at this point, and we'll watch it as it unfolds. John Royall : Thank you. Operator: I'm sorry, we'll take our next question from Doug Leggate with Bank of America. Unidentified Analyst: Hey, good morning, guys. This is Kalei on for Doug. So thanks for taking the question. The first one is on the new Permian disclosure. So you guys are forecasting flat royalty volumes. So I'm wondering, as that becomes a smaller part of the production mix, how is the cash margin from that asset affected going forward? Pierre Breber : Well, royalty barrels have essentially an infinite margin. And so I think if you and Doug can do the math is it's a slightly lower percentage than that will be a part offset, but there's lots of other drivers that we're doing to enhance margins. And we've shown return on capital employed near 30% at $60 Brent equivalent for our premium. So it's a high return low-carbon asset and the royalty barrels, as you know, come with virtually no cost, and that's part of the advantage that we have. Unidentified Analyst: Understood. I appreciate that, Pierre. My second question goes to TCO. Just wondering if we can get an update on timing of first oil from the new expansion projects and the dividend magnitude for 2023. Mike Wirth : Yeah. So the expansion project, as I said, there's a lot of turnarounds in activity, both this year and next year. And at our Investor Day, we laid out a bar chart that gave you an idea on production. The real I think the time, as I said earlier, when you're going to see the production growth will manifest itself in 2024 because the next two years, we've got a lot of these turnarounds, ties, et cetera, in place. So Pierre, you can guide on dividends. Pierre Breber : No change in our affiliate dividend guidance that we shared on the last call of $5 billion to $6 billion for the full year. That includes tinges and our other affiliates. We expect, like last year, a dividend in the second quarter, that will be modest and then a larger dividend in the fourth quarter. TCO continues to hold more cash on its balance sheet to manage through both completing uncertainty around the project and around transport alternatives -- but that cash will come back over time. It's been performing very well. But we don't give specifics on that by year. It's embedded in our overall affiliate dividend guidance. Unidentified Analyst: I appreciate that there's still some turnarounds to work through. But as the production hit a steady state, what do you expect the dividend cadence to look like? Pierre Breber : So as I said, last year, there was in two quarters. This year, again, it will be second quarter and fourth quarter, and we'll just -- it's up to the TCO Board of Directors to make the decisions going forward. Hey, thanks for your questions. Operator: Our next question comes from Josh Silverstein with UBS. Josh Silverstein : Good morning, guys. Just curious about the pace of rig activity in the Permian. You guys are adding one per quarter this year. Outage to be to support growth next year. I'm just curious, as you continue looking forward into next year, do you need to add four more rigs next year to keep kind of that 10% growth pace? Is it less because you're getting more efficient in the Delaware production I'm just curious how you're thinking about the step-up in activity going forward. Mike Wirth : Yeah. I mean we've pulled rigs down dramatically in 2020, and we didn't want to surge back with everything all at once. And so we entered this year with 10 we expect to exit this year with 14 COOP rigs running. And I think consistent with the longer-term production profile that we've outlined we got a big base business that does have decline underneath it. And so you're going to expect us to add some additional rigs as we move into '24. Josh Silverstein : Got it. And I know there's a lot of activity stepping up across the rest of the kind of Lower 48 Haynesville, DJ. They're a little bit more on the gassier side. I'm curious if you guys are pulling back any activity because there are a little bit more gas from in this price environment. Thanks. Pierre Breber : We've -- we're adding a rig in the Haynesville. We talked about that for a number of years building up to that activity. Gas prices are going to be volatile. And frankly, we need to get developing that resource. We have some offset operators. And so if we don't get after it, it's the time for us to do that. DJ still has a heavy liquids component, no change in our plans. In fact, the DJ and Argentina are a couple of other areas where we expect production in the second half of the year to be higher where we're increasing a little bit of activity. And again, all of that is within our existing CapEx budget. Mike Wirth : Thanks, Josh. Operator: We'll go next to Ryan Todd with Piper Sandler Ryan Todd : Thanks. Maybe first off, just a quick follow-up on -- on the comments earlier on and the question on trading, in the international downstream, your earnings were particularly strong this quarter. And I think in the slides there, there's a $270 million other bar, positive other borrowing chart there. Is that primarily trading? And anything to read on that going forward? Is that something that likely reverses or maybe some clarity there? Pierre Breber : You're right. We referred to it. I would not say it's primarily -- it's a lot of factors, and we pointed out to that. It's consistent with how Mike described our trading business. And as all trading businesses are, it can be variable in future quarters. So it's just one of many factors. It's not primarily, but we wanted to cite it as one of the elements in that other variance. Ryan Todd : Thanks, Pierre. And then maybe on the Permian, if you look back at the Permian you've also -- you obviously talked at the Analyst Day, you talked about a variety of the shifts in the 2023 development plan versus 2022. I think -- and you highlighted similar here to that. I think we appreciate some of the near-term impact -- can you talk at all to what some of the longer-term implications are of the shift to more single bench development adjustments to pacing more shift towards New Mexico, et cetera. Does it have any impact on -- like does the move to increase single bench development have any impact on the productivity or recovery of other zones in the area? Does it change at all how you think about service infrastructure and logistics how you think about resource depth in different parts of the portfolio over the long term? Mike Wirth : Yeah, Ryan, I would say not really. We've always been return seeking. And so this is all about optimizing the return we can get out of this asset over the long haul. We've tried to be thoughtful about surface infrastructure. We've tried to be thoughtful about drilling to keep surface infrastructure fully utilized, not over building it for peaks and then leaving it underutilized for long periods of time. And as we're continuing to learn, the fundamental principles about optimizing return on investment continue to drive all of this activity. So as we learn more about benches about communication, about productivity as technology changes, recovery factors, we will continue to apply all of those learnings. But the real objective remains the same. It's not volume, it's value and returns. Pierre Breber : Ryan, and just as a reminder, the move to more single bench is in the Delaware Basin, right? Midland Basin three quarters is multibench development. Ryan Todd : Thanks, Pierre. Operator: We'll take our next question from Jason Gabelman with TD Cowen. Jason Gabelman: Hey, good morning. Thanks for taking my questions. Sorry to go back to the Permian, but I'm going to ask another. I was wondering, and I appreciate all the disclosures are really helpful. But in terms of the non-op component of production, does the proportion stay relatively stable through your forecast period? I think you gave a forecast out to 2027 at the Analyst Day. Does the non-op proportion stay the same? Or do you have more operational barrels between now in '27? Mike Wirth : Yeah. It stays relatively similar, I would say, Jason. We can provide further insights on that as we. There's not a big shift. We're growing activity. As I mentioned earlier, we're adding rigs and you got a pretty big base you're adding in on top of. So those percentages don't move a lot. Jason Gabelman: All right. That's helpful. And then just one accounting question. Depreciation fell decently quarter-over-quarter in upstream. What was that related to? Pierre Breber : Are you looking at it excluding special items or. Jason Gabelman: Yeah. If I look at the quarter-over-quarter Slide 7, Upstream DD&A was positive $345 million. Pierre Breber : Yeah, why don't you follow up with Jake? That could be tied to some exploration activity. Jason Gabelman: Okay. Thanks. Operator: We'll take our next question from Biraj Borkhataria with Royal Bank of Canada. Biraj Borkhataria : Hi, there. Thanks for taking my questions. I wanted to ask about Namibia. You recently farmed in a few months ago. Could you just walk me through plans for the next 12 months or so what you've got pencilled in? And then I've got a follow-up on something else. Thank you. Mike Wirth : Sure. So we've completed seismic acquisition in Namibia at the end of February, and that's being processed right now. And so I can't really comment any further on that. We certainly are mindful of others who have had certain exploration success in the region, which is encouraging, but we need to do the work on that and then determine what the next steps are, which can include drilling exploration wells. So stay tuned on that as we got more information, we'll share it with you, Biraj. Biraj Borkhataria : Okay. And then just on a different topic, cost inflation because more and more, you hear some of the service providers talking about improving pricing and so on. So could you just comment on your latest thoughts and what you're seeing on the cost inflation side outside of the Lower 48? Thank you. Mike Wirth : Sure. So really no change to our mid-single-digit inflation guidance in our current year capital spending. As you note, in the Lower 48, there are some areas where we planned for higher inflation and we're seeing that. I'll remind you that a lot of what we do in our procurement activities are longer term contracts that are either fixed price or index based. We've got detailed cost models to challenge price increases. We commit volumes to certain things over longer periods of time to try to create a win-win between us and our suppliers. And so we've not seen some of the cost push through that you would see if you were buying services or commodities inputs on a spot basis or then current basis because we manage that activity differently. For instance, on offshore rigs, we're fully contracted for this year. We came into the year with three rigs working in the Gulf of Mexico. They're generally below current market rates. And so I think we're managing this well. The one thing I would say is given, these kind of index-based contracts, there are periodic reviews where we will reset based on market indicators. And so in the second quarter in certain parts of our business, we'll be going through this with some of our partners, and we'll see some resets on there that will probably reflect a little bit of the inflation that I referred to earlier, that's already built into our plans. But I think we're managing all that within the range that is embedded in the guidance we've given you. Biraj Borkhataria : Thank you very much. Mike Wirth : Thank you, Biraj. Operator: Thank you. We'll take our last question from Neal Dingmann with Truist Securities. Unidentified Analyst: Hi, this is Patrick on behalf of Neil Dingmann. For my question, it's with respect to Venezuelan exports, I know previously, you made mentioned really no further capital investments in Venezuela. What we're curious to know is there a maximum threshold of exports and sales that you're anticipating out of Venezuela? Mike Wirth : Is -- there a maximum -- I mean it's limited by our position there and the entities that we're involved in and what our portion of that production that we're entitled to market is. We're currently seeing about 100,000 barrels a day of production up from about 50 when the license term changed. That actually go up further this year, maybe another 50% if everything goes well. The rude comes to the U.S., and we're finding a market for the crude. And yeah, it's a six-month license from OPEC, and we have to bear that in mind. So that's why we are proceeding, as you said, which is we've got some past receivables that are being paid from some of these proceeds and there's a lot of relatively straightforward workover and other activity that can help bring production up at -- without major capital commitments. And so that's the current model. We'll see how things unfold and hopefully pointed in a good direction, but it's been a bit of an up and down situation, and we have to -- we just have to take this one step at a time. Unidentified Analyst: It's tough here. I guess just as a follow-up, would there be -- are you exploring that six-month term, are you looking to extend that at all? Or is it too early to be negotiated. Mike Wirth : That's a decision made by the U.S. government. It's not really a negotiation. It's their decision, and it's a policy matter we're asked for input and so we provide input on these things. But for the last several years, these things have had relatively short time lines associated with them. And so we're in full compliance with all the conditions of the sanctions and intend to stay that way. And we'll just see how the policy making turns out. Pierre Breber : This is Pierre. I'm going to go back to Jason's question. So yeah, lower depreciation is really three drivers. Some of it was the absence of some abandonment accruals that were in the fourth quarter. So you can view those as sort of nonrecurring. And then some of it is due to new rates. So each year, we revised our depreciation rates based on additions to proved reserves, and those rates are a little bit lower. And then, of course, first quarter production was a little bit lower than fourth quarter production. So lower volumes also contributed to that lower depreciation. Jake Spiering: I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call. Please stay safe and healthy. Katie, back to you. Operator: Thank you. This concludes Chevron's first quarter 2023 earnings conference call. You may now disconnect.
Chevron Corporation (NYSE:CVX) Earnings Report Analysis
- Chevron's EPS of $2.06 missed the estimated $2.42, marking a negative surprise of 5.94%.
- The company's revenue for the quarter was $52.23 billion, exceeding estimates and demonstrating strong sales performance.
- Chevron's refining business reported a loss for the first time since 2020, highlighting challenges in the industry.
Chevron Corporation (NYSE:CVX) is a major player in the oil and gas industry, known for its integrated operations spanning exploration, production, refining, and marketing. As the second-largest oil producer in the United States, Chevron competes with other industry giants like ExxonMobil and BP. The company operates globally, with a significant presence in both upstream and downstream sectors.
On January 31, 2025, Chevron reported earnings per share (EPS) of $2.06, which fell short of the estimated $2.42. This represents a negative surprise of 5.94%, as highlighted by Zacks. The EPS also marked a decline from the $3.45 reported in the same quarter the previous year. Despite this, Chevron had previously exceeded expectations in the prior quarter with an EPS of $2.51 against an anticipated $2.47.
Chevron's revenue for the quarter ending December 2024 was approximately $52.23 billion, surpassing the estimated $46.60 billion. This exceeded the Zacks Consensus Estimate by 11.21% and marked an increase from the $47.18 billion reported a year ago. Chevron has outperformed consensus revenue estimates in three of the last four quarters, demonstrating its ability to generate strong sales despite challenges.
The company's refining business faced a loss for the first time since 2020, with a $248 million loss in the fourth quarter of 2024. This was a significant drop from the $1.15 billion profit recorded in the same period a year earlier. Weak margins and reduced demand for jet fuel, particularly in the U.S., contributed to this downturn. The decline in fuel sales profits was a trend seen across the industry as economic activity slowed in major markets like the U.S. and China.
Chevron's financial metrics provide insight into its market valuation and financial health. The company has a price-to-earnings (P/E) ratio of approximately 16.87 and a price-to-sales ratio of about 1.45. Its enterprise value to sales ratio is around 1.56, and the enterprise value to operating cash flow ratio is approximately 8.57. Chevron's debt-to-equity ratio is relatively low at 0.17, indicating conservative debt usage, while its current ratio of approximately 1.07 suggests balanced liquidity.
Chevron Corporation's Strong Q3 Financial Performance
- Chevron Corporation (NYSE:CVX) exceeded earnings and revenue forecasts in Q3, showcasing its resilience in the energy sector.
- The company's strategy of reducing costs and boosting oil production, especially in the Permian Basin, has been effective.
- Chevron's solid financial metrics, including a low debt-to-equity ratio and high earnings yield, indicate a strong financial standing.
Chevron Corporation (NYSE:CVX) recently reported its third-quarter earnings, showcasing a strong financial performance. The company reported earnings per share of $2.51, surpassing the estimated $2.43. Additionally, Chevron's revenue reached approximately $50.67 billion, exceeding the forecasted $48.86 billion. This performance highlights Chevron's ability to navigate the energy sector's challenges effectively.
During the Q3 2024 earnings call, key figures such as CEO Mike Wirth and CFO Eimear Bonner discussed Chevron's financial performance. The call, facilitated by Jake Spiering, included analysts from major institutions like Bank of America and Goldman Sachs. Chevron's strategy focuses on reducing costs and increasing oil production, particularly in the Permian Basin, which contributed to the company's strong results.
Chevron's adjusted profit for the quarter was $4.5 billion, or $2.51 per share. Although this is lower than the previous year's $5.7 billion or $3.05 per share, it still exceeded market expectations. The company's record production levels in the United States and the Permian Basin played a significant role in achieving these results, as highlighted by Bloomberg.
Chevron's financial metrics indicate a solid position in the market. The company has a price-to-earnings (P/E) ratio of approximately 14.93 and a price-to-sales ratio of about 1.43. Its enterprise value to sales ratio is around 1.53, and the enterprise value to operating cash flow ratio is approximately 8.49. These figures suggest that Chevron is efficiently managing its resources and maintaining a strong financial standing.
Chevron's debt-to-equity ratio is roughly 0.15, indicating a relatively low level of debt compared to its equity. This low debt level, combined with a current ratio of approximately 1.16, suggests that Chevron has a good level of liquidity to cover its short-term liabilities. The company's earnings yield of about 6.70% further underscores its financial health and ability to generate returns for investors.
Chevron Corporation (NYSE:CVX) Quarterly Earnings Preview
- Analysts predict an earnings per share (EPS) of $2.43 and revenue of approximately $48.99 billion.
- Chevron is rated as a hold due to its strong dividend yield but has limited potential for price appreciation.
- The company boasts a low debt-to-equity ratio of 0.15, indicating financial stability and a conservative approach to debt.
Chevron Corporation (NYSE:CVX) is gearing up to release its quarterly earnings on November 1, 2024. Analysts predict an earnings per share (EPS) of $2.43, with revenue expected to reach around $48.99 billion. As a major player in the energy sector, Chevron operates globally, engaging in both upstream and downstream activities, which include exploration, production, refining, and marketing of oil and gas.
Investors are closely watching Chevron's upcoming earnings announcement. The company is currently rated as a hold, primarily due to its strong dividend yield. However, there is limited potential for price appreciation, and some risks are associated with the earnings release. Despite these concerns, Chevron remains a solid choice for long-term investors, thanks to its strong cash flow and low debt levels.
Chevron's financial metrics provide insight into its market valuation. The company has a price-to-earnings (P/E) ratio of 14.44, which helps investors understand how much they are paying for each dollar of earnings. Its price-to-sales ratio is 1.39, indicating how the market values its sales. Additionally, the enterprise value to sales ratio is 1.48, and the enterprise value to operating cash flow ratio is 8.23, reflecting the company's overall valuation and cash flow efficiency.
The company's earnings yield stands at 6.93%, showing the earnings generated per dollar invested. Chevron's debt-to-equity ratio is relatively low at 0.15, suggesting a conservative approach to using debt in its capital structure. This low ratio indicates that Chevron relies more on equity than debt to finance its operations, reducing financial risk. Furthermore, the current ratio of 1.16 demonstrates Chevron's ability to cover short-term liabilities with its short-term assets, ensuring financial stability.
Chevron Corporation (NYSE:CVX) and Exxon Face Market Scrutiny Ahead of Earnings Announcements
- Chevron's gross profit growth surged by an impressive 75.09%, indicating strong operational performance and cost management.
- Net income growth stood out with a staggering increase of 143.51%, showcasing Chevron's robust financial health and profit-generating ability.
- Despite these positive indicators, Chevron faced challenges with a sharp decline in free cash flow growth, dropping by 63.63%, and a decrease in revenue growth by about 0.94%.
Chevron Corporation (NYSE:CVX) and Exxon, two giants in the oil and gas industry, are under the spotlight as they approach their earnings announcements. This heightened attention comes in the wake of Shell's recent earnings, which, despite surpassing expectations, led to a decline in its share value. This situation highlights the challenging environment and the high expectations set by the market for Chevron and Exxon. Both companies are navigating through a period where their financial performance is critically scrutinized, reflecting broader market pressures and investor expectations.
For Chevron, the recent financial metrics provide a mixed picture. Despite a slight dip in revenue growth by about 0.94%, the company has demonstrated remarkable resilience and efficiency in other areas. Notably, Chevron's gross profit growth surged by an impressive 75.09%. This significant increase indicates a strong operational performance, showcasing the company's ability to manage costs effectively and maintain profitability even in a challenging market environment.
Moreover, Chevron's net income growth stood out with a staggering increase of 143.51%, accompanied by a solid 66.15% rise in operating income growth. These figures underscore Chevron's robust financial health and its ability to generate substantial profits. However, it's not all positive news, as the company faced a sharp decline in free cash flow growth, dropping by 63.63%, and a 45.09% decrease in operating cash flow. These declines highlight potential challenges in liquidity and cash management that Chevron needs to address.
On the balance sheet side, Chevron's asset growth remained nearly unchanged, with a marginal increase of 0.007%. This stability in assets, combined with a modest 0.83% rise in book value per share growth, suggests a steady state of the company's overall value. Interestingly, Chevron managed to reduce its debt by 16.24%, a positive sign that indicates the company's commitment to maintaining a healthy balance sheet and reducing financial leverage.
In summary, Chevron's recent financial performance presents a complex picture. While the company has shown exceptional profit growth and operational efficiency, challenges in cash flow management and a slight decrease in revenue growth cannot be overlooked. As Chevron and Exxon gear up for their earnings announcements, investors and market watchers will be keenly observing how these factors play out in their financial results, especially in comparison to Shell's recent performance.
Chevron (CVX:NYSE) Shines in the Oil and Gas Sector Amidst Market Volatility
In May 2024, Chevron (CVX:NYSE) stands out as a beacon of stability and growth potential in the tumultuous oil and gas sector, despite the ongoing macroeconomic challenges and the volatility in the crude oil market. With crude oil prices hovering around $80 per barrel, influenced by geopolitical tensions and production adjustments, Chevron's resilience is noteworthy. The company's stock, which has seen a period of sideways trading over the past year, is now on the brink of a significant upward movement, further enhanced by an appealing dividend yield of 4%. This scenario presents Chevron as a promising investment for those looking to capitalize on the opportunities within the oil and gas industry.
Chevron's financial robustness is evident from its impressive operating cash flow, which stands at $6.8 billion, projecting an annual potential of $26 billion. This figure could potentially increase to over $35 billion if oil prices were to rise. The company's strategic focus on low break-even assets and the expected boost in cash flows are key factors that underscore its financial health. Additionally, Chevron's decision to ramp up its annual buyback program to between $10 billion and $20 billion, coupled with a planned capital expenditure of $16 billion in 2024, signals a strong commitment to fostering reserve replenishment and steady production growth. These aggressive investment strategies are poised to solidify Chevron's position as a value generator in the energy domain.
The financial metrics further reinforce Chevron's investment appeal. With a price-to-earnings (P/E) ratio of approximately 14.75, Chevron is valued moderately in relation to its earnings, suggesting a balanced investment opportunity. The price-to-sales (P/S) ratio of about 1.55 and an enterprise value to sales (EV/Sales) ratio of roughly 1.63 indicate that the company's market valuation in comparison to its sales is reasonable, offering a potentially lucrative investment avenue. Moreover, the enterprise value to operating cash flow (EV/OCF) ratio of around 8.94 highlights Chevron's efficiency in generating cash from its operations, a critical aspect for investors assessing the company's financial health.
Chevron's earnings yield of approximately 6.78% presents a compelling return on investment based on its current earnings, making it an attractive option for investors seeking value. The low debt-to-equity (D/E) ratio of about 0.14 demonstrates a strong balance sheet with minimal debt relative to equity, further enhancing its financial stability. The current ratio of approximately 1.23 indicates a healthy balance of assets to liabilities, ensuring that Chevron is well-positioned to meet its short-term obligations. These financial indicators, combined with the strategic investments and operational efficiencies, make Chevron a standout choice for investors looking for robust returns in the oil and gas sector.
The positive outlook on energy prices, spurred by anticipated rate cuts and expansionary policies, suggests that oil and commodities are set for an upward trajectory. This environment, along with Chevron's strategic financial management and commitment to growth, positions CVX stock as an enticing investment for those seeking exceptional returns in the oil and gas industry. As highlighted by Seeking Alpha, Chevron's potential to outperform market expectations in terms of earnings per share (EPS) growth adds another layer of attractiveness to its investment profile, making it a compelling choice for investors and market watchers alike.
Chevron Corporation's Q1 2024 Earnings Miss: A Deep Dive into Energy Sector Challenges
Chevron Corporation's Earnings Report Highlights Challenges in Energy Sector
On Friday, April 26, 2024, Chevron Corporation (CVX:NYSE) reported its earnings before the market opened, revealing an earnings per share (EPS) of $0.003. This figure fell significantly short of the estimated EPS of $2.84. Additionally, Chevron's revenue for the period was $48.72 billion, which also did not meet the expected revenue of approximately $50.66 billion. The shortfall in both earnings and revenue reflects the broader challenges faced by the energy sector, particularly in the natural gas market and operational expenses, as highlighted by the Schwab Network. This disappointing performance can be attributed to weak natural gas prices and declining year-over-year refining margins, factors that have impacted not only Chevron but also its peer, Exxon Mobil (XOM).
The earnings call, as reported by Seeking Alpha, featured key corporate participants including Jake Spiering, General Manager of Investor Relations; Mike Wirth, Chairman and Chief Executive Officer; and Eimear Bonner, Vice President and Chief Financial Officer. The participation of a wide range of analysts from prestigious firms underscores the significant interest in Chevron's financial performance and strategic direction. Despite the underwhelming earnings report, the detailed discussion during the call provided investors and analysts with insights into the company's efforts to navigate the current challenges in the energy sector.
Following the earnings announcement, shares of Chevron experienced a decline in trading on Friday, as reported by Yahoo Finance. This decline was in response to the company's decrease in first-quarter revenue compared to the same period last year. However, it's noteworthy that Chevron managed to surpass Wall Street's revenue expectations for the quarter, indicating that while the company faced challenges, its performance was not as dire as some may have anticipated.
In terms of stock performance, Chevron's shares saw an increase of $0.61 or approximately 0.37%, reaching $165.89. The stock fluctuated between a low of $163.3 and a high of $166.98 during the trading session. Over the past year, Chevron's shares have traded as low as $139.62 and as high as $171.7. With a market capitalization of about $308.1 billion and a trading volume of 9.72 million shares, Chevron remains a significant player in the energy sector despite the challenges it faces. This resilience in stock performance, amidst disappointing earnings, suggests investor confidence in Chevron's long-term prospects and its ability to overcome sector-wide obstacles.
Chevron's Financial Performance Amid Market Challenges
Chevron Corporation's Financial Performance Amid Market Challenges
Chevron Corporation (CVX:NYSE), along with industry giants Exxon Mobil Corp and Phillips 66, faced a challenging start to their trading day on Friday, as news of their first-quarter profit declines hit the market. This downturn in profitability was primarily due to shrinking refining margins, a consequence of the market's adjustment post-Russia's invasion of Ukraine in 2022, and a noticeable fall in natural gas prices. Despite these hurdles, Chevron managed to find a silver lining through an uptick in production volumes, which offered some relief against the backdrop of financial pressures.
Diving deeper into Chevron's financial performance reveals a more detailed picture of the challenges and opportunities it faced in the recent quarter. The company witnessed a 9.13% dip in revenue growth, a stark indicator of the headwinds it faced amidst fluctuating market conditions. This was further compounded by a drastic 69.99% fall in gross profit growth, highlighting the impact of narrowing refining margins on its bottom line. Net income growth and operating income growth also saw significant declines, dropping by 65.38% and 59.22% respectively, painting a picture of a company grappling with a tough economic environment.
However, not all was bleak for Chevron during this period. The company managed to report a notable increase in its free cash flow growth by 61.46%, a critical metric that indicates the company's ability to generate cash after accounting for capital expenditures. This is a positive sign for investors, as it suggests that Chevron has the liquidity to sustain operations, invest in growth opportunities, or return value to shareholders through dividends or share buybacks. Additionally, operating cash flow growth rose by 28.54%, further evidencing the company's operational resilience amidst challenging market dynamics.
On the flip side, Chevron's balance sheet did show some areas of concern. The book value per share growth decreased by 2.11%, indicating a potential dilution in shareholder value or a decrease in the company's net asset value. Moreover, debt growth increased by 26.81%, a move that could raise eyebrows among investors wary of the risks associated with high leverage. This increase in debt, while potentially a tool for navigating short-term liquidity needs or financing strategic investments, will require careful management to ensure long-term financial stability.
In summary, Chevron's recent financial performance encapsulates the complex landscape that major oil companies are navigating. The decline in refining margins and natural gas prices has undeniably put pressure on their profitability. Yet, Chevron's ability to boost its production volumes, alongside significant improvements in free and operating cash flow growth, provides a glimpse into the company's strategic responses to these challenges. As the market continues to evolve, Chevron's financial health will be closely watched by investors seeking to gauge the company's adaptability and long-term prospects in a volatile energy sector.
