Chevron Corporation — FY2023 Form 10-K
Business context and reporting period. Chevron is an integrated energy company with upstream oil and gas, refining, marketing, chemicals and lower-carbon businesses. This 10-K covers the fiscal year ended December 31, 2023; Q4 figures are identified separately where noted. Chevron completed its PDC Energy acquisition in August 2023. Its announced all-stock acquisition of Hess, valued at approximately $53 billion, remained pending at filing.
Financial and operating performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Sales and other operating revenues | $196.9 billion | $235.7 billion |
| Net income attributable to Chevron | $21.4 billion | $35.5 billion |
| Diluted earnings per share | $11.36 | $18.28 |
| Cash from operating activities | $35.6 billion | $49.6 billion |
| Capital expenditures | $15.8 billion | $12.0 billion |
| Free cash flow | $19.8 billion | $37.6 billion |
| Total debt | $20.8 billion | $23.3 billion |
| Cash and marketable securities | $8.2 billion | $17.9 billion |
| Current ratio | 1.3 | 1.5 |
Upstream earnings fell to $17.4 billion from $30.3 billion; downstream earnings declined to $6.1 billion from $8.2 billion. Chevron reported no single consolidated operating-margin figure in the supplied filing text. Worldwide net oil-equivalent production averaged 3.12 million barrels per day, up about 4%, principally from PDC and Permian growth. Year-end proved reserves were 11.1 billion barrels of oil-equivalent, slightly below 2022; the 2023 reserve replacement ratio was 86%.
Brent averaged $83 per barrel in 2023 versus $101 in 2022. Lower oil and gas realizations and weaker downstream margins were major factors in the earnings decline. Q4 2023 net income attributable to Chevron was $2.26 billion, compared with $6.35 billion in Q4 2022; Q4 revenue was $48.93 billion versus $54.52 billion.
Material changes and unusual items
- FY2023 revenue, net income, operating cash flow and free cash flow all declined materially year over year, while capital spending rose 32%.
- FY2023 results included an after-tax $1.95 billion charge for abandonment and decommissioning obligations from previously sold U.S. Gulf of Mexico assets, after buyers entered Chapter 11. Cash outlays are expected over the next decade.
- Chevron recorded approximately $1.77 billion in after-tax upstream impairments, mainly related to California assets amid regulatory challenges and lower expected investment.
- Production growth reflected the PDC acquisition and Permian expansion; international production declined about 3%, including normal field declines and lower Thailand production following a concession expiration.
- Chevron paid $6.04 per share in dividends for 2023 and repurchased $14.9 billion of shares. The board raised the quarterly dividend to $1.63 per share for payment in March 2024.
Outlook, risks and contingencies
- Chevron estimates 2024 oil-equivalent production will rise 4–7% over 2023, assuming Brent at $80 per barrel and including expected asset sales. The estimate is subject to operational, market, geopolitical and regulatory uncertainties.
- Estimated 2024 capital expenditures are approximately $16 billion, including about $14 billion upstream and roughly $2 billion of lower-carbon spending within upstream and downstream plans. Affiliate capital expenditures are expected to be $3 billion.
- Management expected Hess to close around mid-2024, subject to stockholder and regulatory approvals and other conditions. The filing notes a dispute over a Stabroek Block joint-operating-agreement right of first refusal and an FTC Second Request, both potential impediments or sources of delay.
- Key exposures include volatile commodity prices and refining margins; permitting and other government actions; climate-related regulation, litigation and changing demand; geopolitical conflict and sanctions; operational, environmental and cyber incidents; and the possibility of liabilities returning from divested assets. Chevron states that it is substantially self-insured for certain catastrophic losses.
- Chevron reported $936 million of environmental remediation reserves and $13.8 billion of asset retirement obligations at year-end. It says future environmental costs may affect results in individual periods, though it does not expect them to materially affect consolidated financial position or liquidity.
- Climate-change lawsuits and Louisiana coastal cases remain unresolved; Chevron says it cannot estimate a possible liability range. California refinery and field enforcement matters also include penalties or potential settlements, including a $20 million Richmond refinery settlement effective February 2024.
- Management’s lower-carbon strategy includes a 2050 upstream Scope 1 and 2 net-zero aspiration and nearer-term intensity targets. Achievement depends on factors including technology, policy, permits, market development and availability of credible offsets; the company may revise its goals.
Most important facts for investors to verify
- Whether lower commodity prices or weaker refining and chemical margins further reduce earnings and cash generation.
- Whether 2024 production guidance and the planned capital program are achieved, including project start-ups and expected asset sales.
- How the Hess transaction, including the Stabroek right-of-first-refusal issue and regulatory review, progresses and affects capital allocation.
- The timing and eventual cost of the Gulf of Mexico abandonment obligations, and any further impairments or environmental liabilities.
- Whether cash generation supports the dividend, buybacks and investment plans while maintaining liquidity and debt ratings; year-end net debt was $12.6 billion and net debt ratio 7.3%.
- Reserve replacement and development progress, particularly given the 86% 2023 reserve replacement ratio and the decline in total proved reserves.
PricewaterhouseCoopers issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting; PDC was excluded from the 2023 internal-control assessment following its acquisition.