10-QPeriod: Q2 FY2018

CHEVRON CORP Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:CVX

Summary

Chevron Corporation reported a strong financial performance for the second quarter and first half of 2018, driven primarily by a significant increase in upstream earnings. This growth was fueled by higher crude oil and natural gas realizations, alongside increased production volumes. Downstream segment earnings saw a decline compared to the previous year, attributed to lower refined product margins, though this was partially offset by improved equity earnings from joint ventures. The company's financial health remains robust, with substantial cash flow from operations supporting capital expenditures and dividend payments. Chevron also highlighted plans to initiate significant share repurchases, signaling a commitment to returning value to shareholders. While the company faces ongoing risks and contingencies, including legal matters and environmental considerations, its operational performance and financial position demonstrate resilience in a dynamic energy market.

Financial Highlights

47 data points
Beta

Revenue

$40.49B

38.9% Gross Margin

Net Income

$3.41B

8.4% Net Margin

EPS (Diluted)

$1.78

Total Assets

$257.93B

Cash & Equivalents

$7.63B

Free Cash Flow

$6.86B

Financial Statements
Beta
Revenue$40.49B
Cost of Revenue$24.74B
Gross Profit$15.75B
SG&A Expenses$1.02B
Operating Expenses$37.33B
Interest Expense$217.00M
Net Income$3.41B
EPS (Basic)$1.79
EPS (Diluted)$1.78
Shares Outstanding (Basic)1.90B
Shares Outstanding (Diluted)1.92B

Key Highlights

  • 1Net income attributable to Chevron Corporation significantly increased to $3.41 billion in Q2 2018 ($1.78/share diluted) from $1.45 billion ($0.77/share diluted) in Q2 2017, and to $7.05 billion ($3.68/share diluted) for the first six months of 2018 from $4.13 billion ($2.18/share diluted) in the prior year period.
  • 2Upstream earnings saw a substantial improvement, with Q2 2018 earnings at $3.30 billion compared to $853 million in Q2 2017, and first six months' earnings at $6.65 billion compared to $2.37 billion.
  • 3Downstream earnings decreased in Q2 2018 to $838 million from $1.20 billion in Q2 2017, and for the first six months to $1.57 billion from $2.12 billion, primarily due to lower refined product margins.
  • 4Operating cash flow increased to $11.9 billion for the first six months of 2018 from $8.7 billion in the same period of 2017.
  • 5The company announced plans to initiate share repurchases of approximately $3 billion per year, starting in July 2018, indicating a strong commitment to shareholder returns.
  • 6Total debt and capital lease obligations decreased slightly to $38.5 billion at June 30, 2018, from $38.8 billion at December 31, 2017.
  • 7Chevron's effective tax rate increased to 30% in Q2 2018 from 25% in Q2 2017, and to 29% for the first six months of 2018 from 18% in the prior year, largely due to higher overall income before tax.

Frequently Asked Questions

The substantial increase in net income was primarily driven by a strong performance in the Upstream segment, which benefited from higher crude oil and natural gas realizations. This was supported by increased production volumes. While the Downstream segment experienced lower margins, the overall improved results in the Upstream segment led to the significant year-over-year earnings growth.

Chevron's financial position remains strong. Cash flow from operating activities increased notably in the first half of 2018, providing ample resources to fund capital expenditures and dividends. Total debt and capital lease obligations saw a slight decrease, indicating effective debt management. The company also has substantial committed credit facilities available for refinancing short-term obligations.

Chevron faces several ongoing contingencies, including significant litigation, most notably the protracted legal battle in Ecuador. Other risks include environmental liabilities, potential impacts from climate change litigation, and uncertainties related to tax matters and audits in various jurisdictions. While management believes adequate provisions are made, the ultimate outcomes remain uncertain and could potentially be material.

Chevron is committed to returning capital to shareholders through both dividends and share repurchases. The company paid substantial dividends in the first six months of 2018 and announced plans to initiate a share repurchase program expected to be around $3 billion per year. This reflects confidence in the company's financial strength and future prospects.