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Chevron Corp Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company achieved record production, both globally and in the United States, and reached key milestones that are expected to underpin years of future cash flow.
- The company has a position in one out of every five wells in the Permian.
- The company achieved first gas at the Sanha Lean Gas Connection project in Angola and plans to bring online its South Angola development later this year.
- The company has a significant resource position in the Eastern Mediterranean, which it is continuing to unlock.
- The company is positioned to participate in the growth of US data centers and generate competitive returns through integration with its US natural gas business.
- Adjusted upstream earnings were impacted by revisions to asset retirement obligations and timing effects, including year-end inventory valuation.
- The company had some significant inventory accounting effects that rolled through the downstream segment.
- The company had some other impacts, including the combination of affiliate distributions and unique commercial activity.
- The company has a volatility in its oil and gas business.
- Venezuela is an issue that has been around for quite some time during the first Trump administration, during the Biden administration and now again, in the second Trump term, sanctions exist on Venezuela.
- Expansion projects at Leviathan and Tamar are expected to come online through the end of the decade.
- The company expects to achieve full production rates, 1 million barrels of oil equivalent per day within the next three months.
- The company expects to achieve $5 billion in 2025 and $6 billion in 2026 with $70 Brent.
- Organic CapEx is expected to remain within the $14 billion to $16 billion guidance range.
Q&A Highlights from Chevron Corp Earnings Call Q4 2024
- Analyst asked about the progress of bringing back the solutions and project coming on stream, and asked for more clarity on the opportunities available.
- Michael K. Wirth, the CEO of Chevron Corporation, explained that the company has a number of significant growth opportunities, including two chemicals projects under construction that are expected to come online in late 2026 or early 2027, projects in the Eastern Mediterranean for Tamar and Leviathan, and further work underway at Leviathan for yet another expansion. He also mentioned that Argentina is expected to grow at a stronger rate in the back half of this decade, contingent upon continued progress in policy and government stability. Additionally, he mentioned that the company has a number of opportunities in West Africa, including a discovery on the Nigeria shelf, Sanha Lean Gas, and South Angola, and has picked up additional acreage offshore Angola. He also mentioned the Venezuelan Partitioned Zone, which has a huge resource position and presents long-term opportunities.
- Michael K. Wirth, the CEO of Chevron Corporation, explained that the company has a number of significant growth opportunities, including two chemicals projects under construction that are expected to come online in late 2026 or early 2027, projects in the Eastern Mediterranean for Tamar and Leviathan, and further work underway at Leviathan for yet another expansion. He also mentioned that Argentina is expected to grow at a stronger rate in the back half of this decade, contingent upon continued progress in policy and government stability. Additionally, he mentioned that the company has a number of opportunities in West Africa, including a discovery on the Nigeria shelf, Sanha Lean Gas, and South Angola, and has picked up additional acreage offshore Angola. He also mentioned the Venezuelan Partitioned Zone, which has a huge resource position and presents long-term opportunities.
- Analyst asked about how Chevron Corporation plans to stay true to its core competency while playing in the ecosystem and ensuring that it can preserve the upside.
- Michael K. Wirth, the CEO of Chevron Corporation, explained that the company is leveraging its strengths to advance lower carbon energy solutions to meet demand growth in the world. He mentioned that the company operates nearly 5 gigawatts of reliable and at scale power today at Gorgon at TCO in refineries, and has technical capabilities to build and operate large-scale power generation and integrate it to a core customer. He also mentioned that the company has a very large natural gas position in the US, which allows it to backstop power investments for premium customers. The company has said it doesn't envision itself as a merchant power player, but high reliability at scale offering that's delivered rapidly is something that's in high demand from customers, and the company has been engaged in discussions with the hyperscalers to understand what they're looking for and whether or not that's something that the company can deliver on. The company has reserved seven of GE Vernova's largest turbines for delivery beginning in late 2026 and into 2027, and expects to be on the front-end of a real surge in power demand in the country. Additionally, the company believes
- Michael K. Wirth, the CEO of Chevron Corporation, explained that the company is leveraging its strengths to advance lower carbon energy solutions to meet demand growth in the world. He mentioned that the company operates nearly 5 gigawatts of reliable and at scale power today at Gorgon at TCO in refineries, and has technical capabilities to build and operate large-scale power generation and integrate it to a core customer. He also mentioned that the company has a very large natural gas position in the US, which allows it to backstop power investments for premium customers. The company has said it doesn't envision itself as a merchant power player, but high reliability at scale offering that's delivered rapidly is something that's in high demand from customers, and the company has been engaged in discussions with the hyperscalers to understand what they're looking for and whether or not that's something that the company can deliver on. The company has reserved seven of GE Vernova's largest turbines for delivery beginning in late 2026 and into 2027, and expects to be on the front-end of a real surge in power demand in the country. Additionally, the company believes
- Analyst asked about the impact of recent energy-related executive orders in the US and how they might affect Chevron's oil and gas operations, particularly in the Gulf, and new energy opportunities.
- Michael K. Wirth, CEO of Chevron, stated that they are pleased with their team's performance in the Permian Basin, delivering 992,000 barrels a day in Q4 and over 1 million barrels a day in December, with a growth of 18% for the full year. They expect to continue to grow even as they have passed their peak investment and started to bring capital investment down, with a target of 9%-10% production growth in 2025 and a little less in 2026. They plan to maintain a lower rate of growth and generate free cash flow from their assets, which will produce over 1 million barrels a day for many years into the future. They have 400,000 barrels a day in the DJ Basin, which is in a plateau phase, and 3.3 million barrels a day in total production, with 50% of the portfolio consisting of highly economic assets that generate production and cash long into the future. They are also working on improving recoveries and developing technologies to extend the plateau and raise it, but they don't want to rule out the possibility of new phases of growth.
- Michael K. Wirth, CEO of Chevron, stated that they are pleased with their team's performance in the Permian Basin, delivering 992,000 barrels a day in Q4 and over 1 million barrels a day in December, with a growth of 18% for the full year. They expect to continue to grow even as they have passed their peak investment and started to bring capital investment down, with a target of 9%-10% production growth in 2025 and a little less in 2026. They plan to maintain a lower rate of growth and generate free cash flow from their assets, which will produce over 1 million barrels a day for many years into the future. They have 400,000 barrels a day in the DJ Basin, which is in a plateau phase, and 3.3 million barrels a day in total production, with 50% of the portfolio consisting of highly economic assets that generate production and cash long into the future. They are also working on improving recoveries and developing technologies to extend the plateau and raise it, but they don't want to rule out the possibility of new phases of growth.
- Analyst asked about the TCO distribution and the $5 billion and $6 billion for 2025 and 2026, compared to the previous guidance of $4 billion and $5 billion.
- The company explained that the higher TCO distribution for 2025 and 2026 is due to the production and affiliate CapEx reduction, resulting in a free cash flow inflection. The company also expects OpEx to come down, contributing to the free cash flow. The company has secured slot reservations with payments for the high-demand turbine spots, and it will be funded through partners and other investors. The company has not changed its CapEx guidance and will develop opportunities that are competitive with other things in their portfolio.
- The company explained that the higher TCO distribution for 2025 and 2026 is due to the production and affiliate CapEx reduction, resulting in a free cash flow inflection. The company also expects OpEx to come down, contributing to the free cash flow. The company has secured slot reservations with payments for the high-demand turbine spots, and it will be funded through partners and other investors. The company has not changed its CapEx guidance and will develop opportunities that are competitive with other things in their portfolio.
- Analyst asked about the performance of the company's reservoirs and how it informs future potential in the basin.
- The wells are performing well, and the reservoir performance is at or above expectations. The company has drilled and completed wells in this pressure and temperature regime, which is a new one for the industry. The company is encouraged by the performance and has a lot of running room in the Gulf of America, where they are a large leaseholder and have a lot of prospective acreage.
- The wells are performing well, and the reservoir performance is at or above expectations. The company has drilled and completed wells in this pressure and temperature regime, which is a new one for the industry. The company is encouraged by the performance and has a lot of running room in the Gulf of America, where they are a large leaseholder and have a lot of prospective acreage.
- Analyst asked about the meaning of "monetize" in the context of the Wheatstone project.
- The company is talking about monetizing the resource over time, not necessarily monetizing the facility itself. The company's primary driver is to optimize the resource through both Wheatstone and Gorgon in a way that is economic, keeps the plants full, and is good for Australia and customers. The company is not considering bringing in a pension fund or anything like that to sell down their position.
- The company is talking about monetizing the resource over time, not necessarily monetizing the facility itself. The company's primary driver is to optimize the resource through both Wheatstone and Gorgon in a way that is economic, keeps the plants full, and is good for Australia and customers. The company is not considering bringing in a pension fund or anything like that to sell down their position.
- Analyst asked about returns in power and how the company manages volatility.
- The company has volatility in their oil and gas business and their refining and marketing business. They look to put in place PPAs that work for customers and work for them. As a large natural gas producer, they have natural gas supply and natural gas commercial capability across the value chain, which they can use to help manage exposure and volatility for their investments, potentially for customers if that's what they're looking for.
- The company has volatility in their oil and gas business and their refining and marketing business. They look to put in place PPAs that work for customers and work for them. As a large natural gas producer, they have natural gas supply and natural gas commercial capability across the value chain, which they can use to help manage exposure and volatility for their investments, potentially for customers if that's what they're looking for.
- Analyst asked about the breakdown of the $2 billion to $3 billion in structural cost reductions between the upstream and downstream segments.
- Eimear Bonner explained that the cost reductions will be across all segments, with a focus on asset sales, changing how they work, and using technology to do work differently. The company is working on standardizing work and centralizing processes, such as designing Whales for certain asset classes. They are also using technology, such as robotics, drones, digital twins, and AI, to reduce cycle times and plan turnarounds. The company expects to see savings come through 2025 and 2026, with a total of $2 billion to $3 billion in structural costs off of the 2024 base.
- Eimear Bonner explained that the cost reductions will be across all segments, with a focus on asset sales, changing how they work, and using technology to do work differently. The company is working on standardizing work and centralizing processes, such as designing Whales for certain asset classes. They are also using technology, such as robotics, drones, digital twins, and AI, to reduce cycle times and plan turnarounds. The company expects to see savings come through 2025 and 2026, with a total of $2 billion to $3 billion in structural costs off of the 2024 base.
