Chevron: Mixed Q2 Earnings, Revenue Up

Chevron reported mixed second-quarter results with a revenue beat but an earnings miss.

Key Points

Reported EPS of $2.43 fell well short of the analyst consensus estimate.
Total revenue topped the analyst estimate and was up nearly 5% year over year.
Chevron increased its production by 11% year over year, primarily driven by its acquisition of PDC Energy.

Global energy leader Chevron (CVX -2.67%)reported second-quarter 2024 earnings on Friday that showed mixed results, with earnings per share (EPS) of $2.43 missing the analyst estimate of $2.93 and falling nearly 32% year over year. Total revenue of $49.6 billion came in just ahead of the consensus estimate. Chevron’s earnings highlights showed lower margins and profitability.

Overall, the quarter reflected strong operational outputs but was marred by higher expenses and softer margins in downstream operations. The oil major also said Friday it is moving its headquarters from San Ramon, California, to Houston, over the next five years with CEO Mike Wirth relocating by the end of 2024.

Metric	2Q 2024	Analyst Estimate	2Q 2023	Change (YOY)
EPS (diluted)	$2.43	$2.93	$3.55	(31.6%)
Total revenue	$49.6 billion	$48.7 billion	$47.2 billion	4.9%
Operating expense	$7.71 billion	ON	$7.22 billion	6.8%
Depreciation, Depletion, Amortization	$4 billion	ON	$3.5 billion	13.7%
Cash Flow From Operations	$6.3 billion	ON	$6.3 billion	Flat

Source: Chevron. Note: Analyst consensus estimates provided by FactSet. YOY = Year over year.

Understanding Chevron

Chevron is one of the world’s largest integrated energy companies, with operations spanning from oil and natural gas exploration to refining and marketing petroleum products. The company’s business includes both upstream operations (exploration, development, and production of crude oil and natural gas) and downstream operations (refining and selling of petroleum products).

Recently, Chevron has focused on expanding its production capacity and enhancing shareholder returns. This includes strategic acquisitions like PDC Energy, leading to increased production in the Permian Basin and Denver-Julesburg Basin.

Quarterly Highlights

One of the quarter’s significant achievements was Chevron’s 11% increase in worldwide net oil-equivalent production, primarily driven by its acquisition of PDC Energy. This resulted in a robust performance in the Permian and DJ Basins in the United States.

Chevron’s upstream earnings for the quarter were $4.47 billion, compared to $4.94 billion in the prior year. The decrease was attributable lower to commodity prices and production downtime in some international locations. Meanwhile, downstream earnings were $597 million, down significantly from $1.51 billion the previous year due to lower margins on refined products.

Operating expenses during the quarter rose to $7.71 billion from $7.22 billion the previous year, reflecting higher costs in refining and production segments. Depreciation, depletion, and amortization also increased to $4.0 billion from $3.521 billion.

Financial metrics such as free cash flow increased at $2.3 billion, and decreased from $2.5 billion in the same quarter last year. Notably, foreign currency effects decreased earnings by $243 million, adding to the financial challenges for the period.

One-time events impacting the quarter included the completion of the Tengizchevroil (TCO) project in Kazakhstan and ongoing investments in renewable projects. The per-share dividend of $1.63 remained stable, continuing Chevron’s commitment to returning cash to shareholders.

Looking Ahead

The earnings release did not specify forward guidance, but management remains optimistic about long-term growth. Chevron expects continued production increases, particularly from the Permian Basin, aiming to reach one million barrels of net oil-equivalent production per day by 2025. It also plans to advance low-carbon energy projects, investing in renewable fuels and hydrogen technologies.

Investors should monitor Chevron’s efforts to balance its conventional and renewable energy initiatives. Key areas to watch include commodity price trends, operational costs, and the effectiveness of recent acquisitions, which will significantly influence Chevron’s financial health and strategic direction moving forward.

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