CVX Financial Analysis

Analysis Date: 2/3/2025

Business Model

Chevron generates revenue from upstream and downstream operations. Upstream revenue comes from the exploration, development, and production of crude oil and natural gas. Downstream revenue is generated from refining crude oil into petroleum products and marketing these products, as well as manufacturing and marketing petrochemicals.

Revenue Sources

• Sales of crude oil and natural gas (Upstream)
• Sales of refined products (Downstream)
• Sales of petrochemicals and additives (Downstream)

Income Statement Analysis

• Total Revenues and Other Income increased by 10.70% primarily driven by Other income (loss) which significantly increased due to foreign currency effects and loss on asset retirements and sales in previous period.
• Operating expenses increased by 23.05% year-over-year, impacting profitability.
• Depreciation, depletion, and amortization decreased by 20.49% year-over-year, positively impacting profitability.
• Net Income Attributable to Chevron Corporation increased significantly by 43.47% year-over-year.

Balance Sheet Analysis

• Cash and cash equivalents decreased by 17.10% compared to previous year end, indicating cash utilization for investments or shareholder returns.
• Total Debt increased by 17.78%, suggesting increased leverage, possibly to fund operations, acquisitions, or shareholder returns.
• Total Chevron Corporation stockholders’ equity decreased by 5.37%, potentially due to share repurchases and dividend payouts exceeding net income growth.

Capital Allocation

Chevron's capital allocation strategy prioritizes returning cash to shareholders through dividends and share repurchases, while also investing in profitable growth projects and maintaining a strong balance sheet. In 2024, Chevron returned a record $27 billion to shareholders, including a 5% dividend increase, and repurchased 5% of outstanding shares. The company is committed to capital discipline, funding only the most competitive projects and aims for industry-leading free cash flow growth (Earnings Call Transcript & News Release).

Management Commentary

Chevron delivered another year of strong results in 2024, which achieved record production both globally and in the United States.

We also returned a record $27,000,000,000 in cash to shareholders through dividends and buybacks.

Chevron reported earnings of $320,000,000,0.0 or $1,.84 per share. Adjusted earnings were $360,000,000,0.0 or $2,.06 per share. Included in the quarter were special items totaling $110,000,000,0.0 related to restructuring and impairment charges.

Adjusted downstream earnings were lower due to softer refining and chemicals margins and timing effects.

Overall Sentiment: Positive. Management expresses confidence in the company's current performance and future outlook, emphasizing record production, shareholder returns, and strategic project execution. While acknowledging lower adjusted downstream earnings and special items, the overall tone is optimistic about achieving higher returns and lower carbon intensity in the near term.

Recommendation

Rating: Hold

Reason for Rating: Based on the analysis, a Hold recommendation is appropriate. Chevron demonstrates strong cash flow generation and commitment to shareholder returns. Record production and strategic project start-ups are positive indicators. However, decreased operating cash flow in Q4 2024 and increased operating expenses raise concerns. While management is optimistic, some near-term headwinds in downstream earnings and increased debt should be considered. A Hold rating allows time to observe the sustained performance of new projects and the effectiveness of cost reduction initiatives.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/3/2025, 5:59:39 AM