CHEVRON CORP quarterly report, Q1 FY2023

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

MetricQ1 2023Q1 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 margin13.5%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 ratio1.41.5 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.