Chevron Corporation — Q2 2021 Form 10-Q
Business context and period: Chevron is a global integrated energy company reporting Upstream, Downstream and All Other activities. This unaudited quarterly filing covers the three and six months ended June 30, 2021; comparisons are with the corresponding 2020 periods. Management notes interim results are not necessarily indicative of future results.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Sales and other operating revenues | $36.1B | $15.9B | $67.2B | $45.6B |
| Net income (loss) attributable to Chevron | $3.08B | $(8.27)B | $4.46B | $(4.67)B |
| Diluted earnings (loss) per share | $1.60 | $(4.44) | $2.32 | $(2.51) |
| Operating cash flow | Not presented for the quarter | $11.15B | $4.80B | |
| Cash capital expenditures | Not presented for the quarter | $3.54B | $5.23B | |
| Free cash flow, as reported by company | Not presented for the quarter | $7.61B | $(0.42)B |
Q2 segment earnings were $3.18B for Upstream and $839M for Downstream; All Other charges were $935M. For the first six months, Upstream earned $5.53B and Downstream $844M, while All Other charges were $1.91B. The filing does not provide consolidated operating-margin percentages.
At June 30, cash and cash equivalents were $7.53B, and cash, cash equivalents and restricted cash totaled $8.69B. Total assets were $242.8B; current assets were $33.0B and current liabilities $28.1B, with a current ratio of 1.2. Short- and long-term debt totaled $43.0B; the reported net debt ratio was 21.0%, versus 22.7% at year-end 2020. The company paid $5.04B in common dividends during the first half and paid $1.34 per share in Q2.
Changes versus prior comparable periods
- Chevron swung from a large loss in Q2 2020 to profit in Q2 2021. Management attributes the improvement mainly to higher crude oil realizations, improved downstream margins, increased production, and the absence of major 2020 impairments, write-offs and severance charges.
- Q2 sales rose to $36.1B from $15.9B. Equity-affiliate income was $1.44B versus a $2.52B loss, reflecting the absence of prior-year impairments in Venezuela and stronger earnings from Tengizchevroil and Chevron Phillips Chemical.
- Worldwide net oil-equivalent production averaged 3.126 million barrels per day in Q2, up from 2.988 million a year earlier, principally reflecting Noble Energy-acquired production and lower curtailments. Six-month production was essentially unchanged at 3.124 million barrels per day.
- First-half operating cash flow increased to $11.15B from $4.80B, while cash capital expenditures fell to $3.54B from $5.23B. First-half capital and exploratory expenditures, including affiliate spending, were $5.29B versus $7.73B.
Outlook, management commentary and risks
- In July, Chevron lowered its expected 2021 organic capital expenditure to around $13B from the original $14B estimate. It also announced expected share repurchases of $2–3B annually beginning in Q3 2021; the program remains discretionary. No earnings or revenue guidance is provided in this filing.
- Management said demand and commodity prices had largely recovered, but demand remained below pre-pandemic levels. Jet fuel demand was particularly weak; Q2 refined-product sales were about 26% above Q2 2020 but about 4% below Q2 2019. Refinery crude utilization was approximately 85%.
- For Tengizchevroil’s Future Growth Project/Wellhead Pressure Management Project, expected first oil moved to mid-2023 for WPMP and late 2023 to mid-2024 for FGP. The $45.2B cost target remained unchanged, but project contingency increased from $1.3B to $1.9B amid pandemic-related schedule uncertainty.
- Key exposures include oil and gas prices, refining and chemical margins, COVID-19 and variants, OPEC+ production actions, inflation and supply-chain costs, operational and project execution risks, environmental regulation and litigation, and tax uncertainty. Management warns actual results may differ materially from forward-looking statements.
- Contingencies include MTBE-related claims, environmental matters and climate-related litigation. Chevron describes the Ecuador judgment of approximately $9.5B as fraudulent and unenforceable, disputes liability, and says it cannot estimate a reasonably possible loss or range. Louisiana coastal lawsuits and climate-related proceedings also remain unresolved.
Important facts for investors to verify
- How much of the earnings and cash-flow recovery is sustainable if oil prices, refining margins or demand weaken?
- Whether the revised Tengiz project schedule and contingency remain adequate, and whether the $45.2B cost target is maintained.
- Whether the planned $13B organic capital program and $2–3B annual repurchases are consistent with dividend, debt and liquidity priorities.
- Developments in Ecuador arbitration and enforcement, climate and Louisiana litigation, tax audits, and other environmental contingencies.
- Whether post-pandemic product demand, especially jet fuel, recovers and how rising industry input costs affect margins and spending.