Chevron Corporation — Q1 2023 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2023, compared with Q1 2022. Chevron operates through Upstream and Downstream segments, with other corporate activities.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Sales and other operating revenues | $48.8 billion | $52.3 billion |
| Net income attributable to Chevron | $6.57 billion | $6.26 billion |
| Diluted earnings per share | $3.46 | $3.22 |
| Approximate net margin | 13.5% | 12.0% |
| Operating cash flow | $7.21 billion | $8.06 billion |
| Capital expenditures | $3.04 billion | $1.96 billion |
| Free cash flow (company-defined) | $4.17 billion | $6.10 billion |
| Cash, cash equivalents and marketable securities | $15.8 billion at March 31 | $17.9 billion at year-end 2022 |
| Total debt and finance lease liabilities | $23.2 billion at March 31 | $23.3 billion at year-end 2022 |
| Current ratio | 1.4 | 1.5 at year-end 2022 |
Chevron paid $2.86 billion in common dividends, or $1.51 per share, during the quarter. The effective tax rate was 31%, unchanged year over year. The filing reports segment earnings, rather than segment margins: Upstream earned $5.16 billion versus $6.93 billion, while Downstream earned $1.80 billion versus $331 million.
Material changes versus Q1 2022
- Revenue fell about 7%, primarily reflecting lower commodity prices; net income rose about 5% and diluted EPS increased from $3.22 to $3.46.
- Lower upstream realizations reduced Upstream earnings. Worldwide net oil-equivalent production fell 3% to 2.98 million barrels per day, primarily due to expiration of the Erawan concession in Thailand.
- Downstream earnings improved sharply on higher refined-product margins. International Downstream moved from a $155 million loss to $823 million in earnings.
- Operating cash flow declined about 11%, while capital expenditures rose about 55%; free cash flow consequently decreased.
- Cash returned through dividends and share repurchases was substantial. Chevron repurchased 22.4 million shares for approximately $3.75 billion in Q1; its new $75 billion repurchase authorization took effect April 1, 2023.
Outlook, risks and notable items
- The filing provides no specific earnings or production guidance. Management emphasizes that results depend materially on oil and gas prices, downstream margins, production, and market conditions.
- Management reported inflation and tight markets for some oil-and-gas services, with skilled-labor pricing pressure; it said costs were rising more slowly than the prior year and cited contracts and secured supplies as cost-management measures.
- Key risks include commodity-price and demand volatility, OPEC+ actions, operational or project disruptions, supply-chain and inflation pressures, sanctions and geopolitical events, regulation and the energy transition, and environmental and tax contingencies.
- Climate-related lawsuits and Louisiana coastal-damage cases remain pending. The first Louisiana state-court trial was scheduled as early as Q4 2023. Management disputes the claims; potential outcomes and exposure are uncertain. The Ecuador litigation and related arbitration also remain unresolved in part.
- Chevron said Venezuela crude-oil liftings began in Q1 under U.S. authorization and could contribute positively; results are recorded as non-equity investments, with income recognized when cash is received.
- Notable developments included first oil at Mad Dog 2 and announced investments or collaborations involving carbon storage, renewable fuels, and LNG fleet emissions technology.
Important facts for investors to verify
- Whether oil and gas prices, production volumes, and refining margins sustain the trends underlying the quarter’s earnings mix.
- Whether operating cash flow and free cash flow support the planned capital program, dividend, and share repurchases.
- The pace and actual amount of repurchases under the $75 billion authorization; the announced Q2 expectation of $4.375 billion is not an obligation.
- Developments in climate and Louisiana litigation, tax examinations, and environmental obligations, including any change in potential financial exposure.
- Effects of the energy transition, regulation, inflation, supply constraints, and geopolitical developments on costs, projects, and asset values.