Chevron Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Chevron is an integrated energy company reporting Upstream and Downstream segments. The unaudited interim results are not necessarily indicative of future results.
Financial performance
Amounts are in U.S. dollars; financial amounts are in billions unless stated otherwise.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Sales and operating revenues | $47.2 | $65.4 | $96.1 | $117.7 |
| Net income attributable to Chevron | $6.01 | $11.62 | $12.58 | $17.88 |
| Diluted EPS | $3.20 | $5.95 | $6.66 | $9.17 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $13.5 | $21.8 |
| Capital expenditures | $3.8 | $3.2 | $6.8 | $5.1 |
| Free cash flow | Not stated for quarter | Not stated for quarter | $6.7 | $16.7 |
Q2 income before tax was $7.8 billion versus $16.0 billion; income tax expense was $1.8 billion versus $4.3 billion. The effective tax rate was 23% versus 27%. The filing does not provide a consolidated operating-margin figure.
Segment earnings and operating trends
- Upstream: Q2 earnings were $4.9 billion versus $8.6 billion; first-half earnings were $10.1 billion versus $15.5 billion. Lower oil and gas realizations were the primary drag, partly offset by higher sales volumes and, in Q2 international results, favorable tax items.
- Downstream: Q2 earnings were $1.5 billion versus $3.5 billion; first-half earnings were $3.3 billion versus $3.9 billion. Q2 weakness reflected lower refined-product margins and higher operating expenses. International Downstream first-half earnings rose to $1.2 billion from $928 million, mainly on higher refined-product margins.
- Production: Worldwide net oil-equivalent production averaged 2.959 million barrels per day in Q2, up from 2.896 million. First-half average production was 2.968 million barrels per day, slightly below 2.978 million a year earlier, primarily reflecting expiration of the Erawan concession in Thailand.
Liquidity, debt and capital returns
- Cash, cash equivalents and marketable securities totaled $9.6 billion at June 30, 2023, down from $17.9 billion at year-end 2022. Cash and cash equivalents alone were $9.3 billion.
- Current assets were $42.8 billion and current liabilities $29.8 billion; the current ratio was 1.4, versus 1.5 at year-end. The net debt ratio was 7.0%, versus 3.3%.
- Total debt and finance lease liabilities were $21.5 billion, down from $23.3 billion at year-end. Chevron reported no commercial paper outstanding and no borrowings under its $8.5 billion committed credit facilities.
- First-half cash dividends were $5.7 billion, or $3.02 per share. A quarterly dividend of $1.51 per share was declared in July for payment in September.
- The $75 billion share repurchase program began April 1, 2023. Chevron repurchased 27.3 million shares for $4.4 billion in Q2 and said it expected to repurchase at least $3.0 billion in Q3. First-half purchases totaled approximately 49.7 million shares.
Material changes, outlook and risks
- Revenue and earnings declined substantially year over year, principally due to lower commodity prices and upstream realizations, weaker Q2 downstream margins, and reduced equity-affiliate income. First-half operating cash flow and free cash flow also fell; capital expenditures increased by $1.7 billion, primarily from higher Permian Basin spending.
- Management described crude oil prices as stabilizing in July after OPEC+ supply cuts. Chevron’s results remain sensitive to commodity prices, production quotas, natural gas prices, refining and chemicals margins, and operating disruptions. The filing gives no comprehensive numerical earnings or production guidance.
- Chevron announced an all-stock acquisition of PDC Energy, with closing expected in August 2023, subject to conditions including PDC stockholder approval. The company warned that completion, integration and anticipated benefits—including synergies and incremental free cash flow—were uncertain.
- Management cited supply-chain constraints, inflation and tight labor markets, while noting that costs varied by category and some materials prices had declined. Climate policy, technology and changing customer preferences create uncertainty for the pace and economics of the energy transition.
- Material legal matters include Ecuador-related proceedings, U.S. climate-change lawsuits, and 39 Louisiana coastal erosion cases; the first Louisiana trial was scheduled for November 2023. Management disputes the claims and says it will defend them. Environmental liabilities may continue to arise; additional future costs are not fully determinable.
- Tax-authority audits and resolutions are uncertain; the company could not estimate the range of possible adjustments to unrecognized tax benefits beyond the next 12 months. A California air-quality regulator also sought resolution of alleged Richmond refinery violations that may result in a civil penalty of at least $1 million.
- Management reported effective disclosure controls as of June 30, 2023, and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Track oil and gas realizations, production volumes, and the extent to which commodity prices explain future earnings and cash-flow changes.
- Verify downstream refining margins, operating costs, and equity-affiliate contributions, particularly CPChem and TCO.
- Assess cash generation against higher capital spending, dividends and share repurchases; monitor cash balances and net debt.
- Confirm PDC Energy acquisition completion, integration progress and delivery of stated synergies and cash-flow benefits.
- Monitor litigation developments, environmental obligations, tax matters, and potential impacts from climate regulation and supply-chain costs.