Chevron Corporation (NYSE: CVX) — Form 10-Q Summary
Reporting period: Three months ended March 31, 2022. Filed May 4, 2022. Interim financial statements are unaudited.
Business context and results
Chevron operates primarily through Upstream and Downstream segments. Results improved substantially year over year, driven mainly by higher oil and natural gas realizations, with higher refined-product sales and margins also contributing.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Sales and other operating revenues | $52.3 billion | $31.1 billion |
| Income before tax | $9.1 billion | $2.2 billion |
| Net income attributable to Chevron | $6.26 billion | $1.38 billion |
| Diluted earnings per share | $3.22 | $0.72 |
| Effective tax rate | 31% | 36% |
Revenue increased about 68% year over year. Net income attributable to Chevron was approximately 12.0% of revenue, versus 4.4% in the prior-year quarter; these percentages are calculated from reported figures.
Cash flow, liquidity and capital
- Operating cash flow was $8.1 billion, compared with $4.2 billion. Cash capital expenditures were $2.0 billion; reported free cash flow, defined as operating cash flow less capital expenditures, was $6.1 billion versus $2.5 billion.
- Cash and cash equivalents were $11.7 billion at quarter-end, up from $5.6 billion at December 31, 2021. Cash, cash equivalents and restricted cash totaled $12.8 billion.
- Current assets were $44.7 billion and current liabilities $31.2 billion; the reported current ratio was 1.4, versus 1.3 at year-end.
- Short- and long-term debt were $0.3 billion and $29.0 billion, respectively. Total debt and finance lease liabilities were $29.3 billion, down from $31.4 billion at year-end. The reported net debt ratio was 10.8%, versus 15.6%.
- Chevron paid $2.7 billion in common dividends, or $1.42 per share. It repurchased approximately $1.25 billion of shares in the quarter and expected to repurchase $2.5 billion in Q2, subject to market conditions and other factors.
- Financing cash flow included $4.6 billion of proceeds from shares issued for stock-option exercises; management said future option-exercise proceeds were expected to be lower.
Segments and operating developments
- Upstream: Earnings rose to $6.93 billion from $2.35 billion, principally on higher realizations. U.S. earnings were $3.24 billion and international earnings $3.70 billion. Worldwide net oil-equivalent production averaged 3.06 million barrels per day, down 2% year over year: U.S. production rose 10%, while international production fell 8%.
- Downstream: Earnings were $331 million versus $5 million. U.S. earnings improved to $486 million from a $130 million loss, while international downstream recorded a $155 million loss versus $135 million of earnings. U.S. refined-product sales increased 16%; international sales increased 5%.
- Brent crude averaged $102 per barrel in Q1 2022, compared with $71 for full-year 2021; U.S. Henry Hub natural gas averaged $4.53 per thousand cubic feet, versus $3.47 in Q1 2021. Management attributed stronger upstream results primarily to higher realizations.
Outlook, risks and contingencies
- No specific consolidated earnings or production guidance for future periods is provided in the supplied filing text. Chevron said 2022 capital spending and announced acquisitions were expected to be more than 50% above 2021 capital expenditures of $11.7 billion. This outlook included announced acquisitions of Renewable Energy Group for $3.15 billion and Bunge-related investment of $600 million.
- Management identified commodity prices, refining and chemicals margins, production, inflation, supply-chain constraints, COVID-19 impacts, changing regulation, and geopolitical developments—including the Russia-Ukraine conflict—as key uncertainties. Rising costs and supply disruptions could affect operations and spending.
- Damage to two offshore loading moorings at the Caspian Pipeline Consortium terminal led to temporary curtailments at Tengizchevroil, in which Chevron holds a 50% interest. One mooring was repaired, and TCO production returned to normal rates by April 23; Chevron reported no material impact on its results or financial position from the incident. Management noted that sanctions or further regional disruptions could adversely affect production, transport or exports.
- Chevron described climate-change, Louisiana coastal erosion and other environmental litigation, as well as tax audits and other contingencies. It is contesting the Ecuador judgment; the final arbitration phase to determine compensation owed by Ecuador was ongoing. The company said climate-related proceedings could have a material adverse effect, although management viewed them as legally and factually meritless and their damages liability as remote.
- Management estimated 2022 pension contributions of about $1.3 billion and other postretirement benefit contributions of about $150 million. It noted that additional pension funding could be required depending on investment returns, obligations and other factors.
Important facts for investors to verify
- How much of the earnings and cash-flow improvement persists if commodity prices or refining margins decline.
- Whether production growth, particularly in the U.S., offsets international declines and field depletion.
- Actual 2022 capital spending, acquisition costs and subsequent share repurchases relative to the announced plans.
- Developments in Russia-related sanctions and export routes, and any renewed disruption to the CPC terminal or TCO output.
- Material developments in climate, Louisiana, Ecuador and environmental litigation, as well as unresolved tax examinations.