Chevron Corporation — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited. Chevron operates primarily in Upstream and Downstream, with results materially exposed to commodity prices and refining margins.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Sales and other operating revenues | $63.5B | $42.6B | $181.2B | $109.7B |
| Net income attributable to Chevron | $11.2B | $6.1B | $29.1B | $10.6B |
| Diluted EPS | $5.78 | $3.19 | $14.95 | $5.51 |
| Operating cash flow | Not provided for the quarter | $37.1B | $19.7B | |
| Free cash flow | Not provided for the quarter | $29.0B | $14.3B |
Q3 segment earnings were $9.3B Upstream and $2.5B Downstream, versus $5.1B and $1.3B, respectively, a year earlier. Nine-month segment earnings were $24.8B Upstream and $6.4B Downstream. Higher realizations drove Upstream growth; stronger refined-product margins drove Downstream growth. The filing does not provide a clear consolidated operating-margin figure.
Cash, debt and capital allocation
- At September 30, cash and cash equivalents were $15.2B, marketable securities $0.3B, and total debt on the balance sheet $23.6B. Management reported total debt and finance lease liabilities of $23.6B, down from $31.4B at year-end 2021.
- Current ratio was 1.4, compared with 1.3 at year-end 2021; net debt ratio was 4.9%, versus 15.6%.
- Nine-month capital expenditures were $8.1B; capital and exploratory expenditures were $8.2B. Dividends paid totaled $8.3B, and share repurchases totaled $7.5B gross. Q3 repurchases were $3.75B.
- The company had $10.1B of committed 364-day credit facilities and no borrowings under them at quarter-end. It declared a $1.42-per-share quarterly dividend in October, payable in December, and expected $3.75B of repurchases in Q4, subject to market and other factors.
Material changes and notable items
- Revenue and earnings increased substantially year over year, primarily with higher oil and gas realizations and refined-product margins. Nine-month production averaged 3.00 million barrels of oil equivalent per day, down 3%, mainly reflecting contract expirations in Thailand and Indonesia.
- Chevron acquired Renewable Energy Group in June for approximately $3.15B; the net cash outflow was $2.86B. REG operates 11 biorefineries and expanded Chevron’s renewable-fuels business.
- Q3 U.S. refinery crude input fell 13% year over year, primarily due to planned turnarounds; international refinery input rose 11%. Costs also rose, including transportation, turnaround and employee-benefit expenses.
- Nine-month share-based compensation plan share issuances were reported at $5.5B, versus $0.4B in the prior-year period; management said future cash proceeds from option exercises are expected to be lower.
Outlook, risks and contingencies
The filing gives no specific consolidated earnings or production guidance. Management described elevated refining margins but noted signs that high product prices and macroeconomic concerns could slow demand and reduce margins. Brent averaged $101 per barrel in Q3 and was about $93 at the end of October; crude prices rose in early October following announced OPEC+ production cuts. Management’s strategy combines growth in traditional oil and gas with lower-carbon activities, including renewable fuels, hydrogen, carbon capture and offsets.
- Key business risks include volatile oil and gas prices, refining and chemical margins, inflation and supply-chain constraints, production disruptions, geopolitical events and sanctions, changing regulation, and climate-related policy and litigation.
- Two of three offshore loading moorings at the Caspian Pipeline Consortium terminal were out of service for repairs. The pipeline was operating at about 70% capacity with one mooring; repairs were expected in Q4 2022, weather permitting. Future TCO production curtailments remained a risk.
- Chevron disclosed climate-related lawsuits and 39 Louisiana coastal cases, among other litigation. Management disputes the claims and intends to defend them. The Ecuador arbitration’s compensation phase remained ongoing; Ecuador had appealed to the Dutch Supreme Court.
- The Inflation Reduction Act introduces, among other provisions, a 15% book-income minimum tax and 1% excise tax on stock repurchases in 2023. Chevron was evaluating the effects.
- Tax audits and outcomes remain uncertain; developments could significantly change unrecognized tax benefits within 12 months, but the company could not estimate a range of possible adjustments. Environmental and other contingencies may lead to future costs; the company said it did not expect environmental costs to materially affect consolidated financial position or liquidity.
Important facts for investors to verify
- How earnings and cash generation respond if commodity prices or refining margins fall from 2022 levels.
- Whether production, particularly in Kazakhstan and other international operations, is affected by pipeline repairs, sanctions, or contract expirations.
- Actual Q4 repurchases, dividend payments, and the sustainability of capital returns alongside planned investment.
- REG integration, acquisition-related valuation adjustments, and the economics of lower-carbon investments.
- Developments in climate, Louisiana and Ecuador litigation, tax audits, and implementation of the Inflation Reduction Act.