Chevron Corporation — Q2 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and six months ended June 30, 2022. Chevron operates through Upstream and Downstream segments, with additional corporate and other activities. Interim results are not necessarily indicative of future results.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Sales and operating revenues | $65.4 billion | $36.1 billion | $117.7 billion | $67.2 billion |
| Net income attributable to Chevron | $11.6 billion | $3.1 billion | $17.9 billion | $4.5 billion |
| Diluted earnings per share | $5.95 | $1.60 | $9.17 | $2.32 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $21.8 billion | $11.2 billion |
| Capital expenditures | Not provided for quarter | Not provided for quarter | $5.1 billion | $3.5 billion |
| Free cash flow | Not provided for quarter | Not provided for quarter | $16.7 billion | $7.6 billion |
- Q2 segment earnings: Upstream $8.6 billion versus $3.2 billion; Downstream $3.5 billion versus $0.8 billion. First-half segment earnings were $15.5 billion in Upstream and $3.9 billion in Downstream.
- Cash, cash equivalents and marketable securities were $12.4 billion at June 30, compared with $5.7 billion at year-end 2021. Current ratio was 1.3, unchanged from year-end.
- Total debt and finance lease liabilities were $26.2 billion, down from $31.4 billion at year-end. Balance-sheet short-term and long-term debt were $3.2 billion and $23.0 billion, respectively. Net debt ratio declined to 8.3% from 15.6%.
- Chevron paid $5.5 billion in common dividends during the first half; the Q2 dividend was $1.42 per share.
Material changes versus the prior comparable period
- Q2 net income rose to $11.6 billion from $3.1 billion, primarily reflecting higher oil and gas realizations and stronger refined-product margins. Revenue increased 81% year over year.
- Upstream earnings benefited from higher realizations and favorable foreign currency effects. International production declined, largely following the expiration of concessions in Thailand and Indonesia; total first-half production was down 5% year over year.
- Downstream earnings increased substantially on higher refined-product margins and foreign-exchange effects. Refined-product sales rose as jet-fuel demand recovered, while U.S. refinery input was affected by planned turnarounds.
- First-half operating cash flow increased to $21.8 billion from $11.2 billion. Cash capital expenditures increased to $5.1 billion from $3.5 billion.
Outlook, management commentary, risks and unusual items
- Management reported strong crude prices and refining margins in Q2, while noting that high product prices and macroeconomic concerns were beginning to weigh on demand and could reduce margins. No consolidated earnings or revenue guidance is stated in the provided filing text.
- In July, Chevron raised the top end of its annual share-repurchase guidance range to $15 billion and expected to repurchase $3.75 billion of shares in Q3. These plans are subject to market conditions and may be changed or discontinued.
- Chevron completed its $3.15 billion all-cash acquisition of Renewable Energy Group on June 13. The acquisition added $590 million of debt and finance leases and $293 million of goodwill; purchase accounting values remained provisional.
- Q2 and first-half results included higher operating costs, including a Sabine Pass early contract-termination charge. First-half results also included asset-sale gains and favorable foreign-currency effects.
- Key exposures include commodity-price and refining-margin volatility; lower production from concession expirations; inflation and supply-chain constraints; geopolitical developments and potential sanctions affecting regional exports; climate-related regulation and litigation; and uncertain environmental, tax and other legal contingencies.
- Chevron said CPC pipeline mooring repairs were completed and Tengizchevroil returned to normal production rates in April; the incident did not materially affect results or financial position. Management considers the Ecuador judgment illegitimate and unenforceable and is pursuing arbitration compensation. Climate-change and Louisiana coastal lawsuits remain pending; management says it will vigorously defend them.
Most important facts for investors to verify
- Whether elevated commodity prices and refining margins persist, and how a potential demand slowdown affects earnings and cash generation.
- Whether international production stabilizes after concession expirations and whether planned projects deliver expected output.
- The timing and final purchase accounting for Renewable Energy Group, including the acquired assets, liabilities and goodwill.
- Actual share repurchases and dividends versus announced plans, alongside capital spending and debt-reduction priorities.
- Developments in climate, environmental, Ecuador, Louisiana and tax matters, including any material financial effects or changes in contingencies.