Chevron Corporation — FY2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing also reports unaudited fourth-quarter results; it is an annual report, not a standalone Q4 filing. Amounts below are U.S. dollars.
Business context
Chevron is an integrated energy and chemicals company with Upstream operations (oil and gas exploration, production and transportation) and Downstream operations (refining, marketing, renewable fuels and chemicals). Its stated objective is higher returns, lower carbon and superior shareholder value. Results remain substantially exposed to commodity prices, particularly crude oil.
Financial and operating highlights
| Metric | FY2021 | FY2020 |
|---|---|---|
| Sales and other operating revenues | $155.6 billion | $94.5 billion |
| Net income (loss) attributable to Chevron | $15.6 billion | $(5.5) billion |
| Diluted earnings (loss) per share | $8.14 | $(2.96) |
| Cash provided by operating activities | $29.2 billion | $10.6 billion |
| Cash capital expenditures | $8.1 billion | $8.9 billion |
| Free cash flow | $21.1 billion | $1.7 billion |
| Year-end cash and cash equivalents | $5.6 billion | $5.6 billion |
| Total debt | $31.4 billion | $44.3 billion |
| Current ratio | 1.3 | 1.2 |
| Debt ratio | 18.4% | 25.2% |
| Net debt ratio | 15.6% | 22.7% |
The filing does not provide a single consolidated operating-margin figure. 2021 return on average capital employed was 9.4%, versus negative 2.8% in 2020.
- Segment earnings: Upstream earned $15.8 billion, versus a $2.4 billion loss in 2020; Downstream earned $2.9 billion, versus $47 million in 2020. International Downstream earnings declined to $525 million from $618 million.
- Production: Worldwide net oil-equivalent production averaged a record 3.099 million barrels per day, up about 1% from 2020. U.S. production rose 8%; international production declined 3%.
- Reserves: Year-end proved reserves were 11.3 billion barrels of oil-equivalent, up 1%; the 2021 reserve replacement ratio was 112%.
- Shareholder returns: Annual dividend was $5.31 per share, up from $5.16. Dividends paid totaled $10.2 billion. Chevron repurchased $1.4 billion of shares in 2021.
Material changes versus FY2020
- Revenue and earnings rebounded as oil and gas prices, product demand and U.S. refining margins recovered from pandemic-affected 2020 levels. Brent averaged $71 per barrel in 2021 versus $42 in 2020.
- The return to profitability reflected higher upstream realizations and the absence of major 2020 impairments and write-offs. Chevron reported no individually material impairments in 2021; 2020 included approximately $4.8 billion of after-tax upstream impairments and other asset write-offs.
- Operating cash flow increased substantially, while total debt fell by $12.9 billion, largely through debt repayments, early retirement and elimination of commercial-paper borrowings.
- Worldwide refined-product sales rose to 2.454 million barrels per day from 2.224 million, as gasoline and diesel demand improved; jet fuel demand remained comparatively affected.
- Production growth from the Noble acquisition and lower curtailments was partly offset by asset sales, expiration of the Rokan concession in Indonesia, entitlement effects and normal field declines.
Outlook, risks and notable items
- Production outlook: Management estimated 2022 oil-equivalent production would be flat to down 3% versus 2021, assuming Brent at $60 per barrel and excluding asset sales that may close in 2022. Excluding contract expirations and 2022 asset sales, production was expected to rise 2% to 5%.
- Capital plan: Estimated 2022 organic capital and exploratory expenditures were approximately $15 billion, including affiliate spending. About $800 million was designated for lower-carbon spending. Spending remains adjustable if oil-market conditions deteriorate.
- Energy transition: Chevron planned approximately $10 billion of lower-carbon investment through 2028, including about $2 billion to reduce the carbon intensity of traditional operations and $8 billion for lower-carbon businesses. It announced an aspiration for net-zero Upstream Scope 1 and 2 emissions by 2050 and nearer-term intensity targets; these are aspirations and targets, not guarantees.
- Capital returns: The Board raised the quarterly dividend to $1.42 per share in January 2022. Management expected $1.25 billion of repurchases in Q1 2022; the $25 billion authorization had $18.2 billion remaining at year-end 2021.
- Commodity, operating and transition risks: Earnings and liquidity are sensitive to oil and gas prices, refining and chemicals margins, demand, OPEC+ actions, supply-chain costs, inflation, pandemic impacts, project execution, political and regulatory conditions, cyber threats, severe weather and climate-related regulation or demand shifts.
- Contingencies: Environmental remediation reserves were $960 million; asset retirement obligations were $12.8 billion. The filing describes Ecuador litigation involving a judgment of approximately $9.5 billion, which management considers illegitimate and unenforceable, and climate-related and Louisiana coastal litigation. Management says climate cases could have a material adverse effect, although it believes the claims are without merit.
- Unusual items: 2021 earnings included approximately $785 million of after-tax asset-sale gains and charges of $519 million for pension settlements, $260 million for early debt retirement, $120 million for upstream remediation and $110 million for downstream legal reserves.
- Audit and controls: PwC issued an unqualified opinion on the financial statements and internal control over financial reporting. The critical audit matter concerned proved oil and gas reserve estimates and their effect on upstream property depreciation.
Most important facts for investors to verify
- How much of the earnings and free-cash-flow rebound persists under lower commodity prices, and how sensitive are results to the filing’s $60-per-barrel production assumption?
- Whether the 2022 production outlook and major project schedules are achieved, including Tengiz FGP/WPMP and Gulf of Mexico developments.
- Reserve replacement, proved undeveloped reserve conversion and the assumptions behind reserve estimates, including the approximately 1.6 billion BOE undeveloped for five or more years.
- Progress, funding and expected returns on the planned lower-carbon investments and stated emissions targets.
- Developments in major litigation, tax matters, environmental remediation and decommissioning obligations, and any resulting cash or earnings effects.
- Execution of the capital-spending, dividend and repurchase plans while maintaining liquidity and investment-grade credit ratings.