01—Abstract
Summary
Summary of the 8-K filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Chevron reported second quarter 2024 earnings of $4.4 billiona ($2.43 per diluted share), down from $6.0 billion ($3.20 per share) a year earlier.
Adjusted earnings, which exclude foreign currency effects and special items, were $4.7 billionb ($2.55 per share), compared with $5.8 billion ($3.08 per share) in the prior-year quarter. The decline was driven mainly by lower margins on refined product sales, the absence of favorable prior-year tax items, and negative foreign currency effects, partly offset by higher upstream volumes following the PDC Energy acquisition. Upstream earnings were $4.5 billion, while downstream earnings fell to $0.6 billion from $1.5 billion.
Production was the standout operating result: worldwide net oil-equivalent production rose 11 percent year over year to 3.29 million barrels per day, with U.S. output up 353,000 barrels per day on PDC integration and record Permian volumes. Downtime in Australia and the El Segundo, California refinery partly offset these gains. Cash flow from operations was flat at $6.3 billionc, while free cash flow was $2.3 billion.
Capital expenditures rose to $4.0 billiond, and the net debt ratio increased to 10.7 percent from 7.0 percent a year earlier, reflecting higher borrowings. Chevron returned $6.0 billion to shareholders in the quarter, including $3.0 billion in dividends and $3.0 billion in share repurchases, and declared a quarterly dividend of $1.63 per share. Management said the company remains positioned for long-term earnings and cash flow growth despite near-term operational downtime and softer refining margins.
The company also expanded its global exploration portfolio in Namibia, Brazil, Equatorial Guinea, and Angola. Note that the filing references the pending Hess transaction in its forward-looking statements, and these results are unaudited.
02—Key points
Key Highlights
- Reported Q2 2024 earnings of $4.4B ($2.43/diluted share), down from $6.0B ($3.20/share) in Q2 2023; adjusted earnings of $4.7B ($2.55/share) versus $5.8B ($3.08/share).
- Worldwide net oil-equivalent production rose 11% year over year to 3,292 MBOED, driven by the PDC Energy integration and record Permian output, partly offset by Australian downtime.
- Downstream earnings fell to $597M from $1.5B a year earlier on lower refined product margins, higher U.S. operating expenses, and El Segundo refinery downtime.
- Cash flow from operations was $6.3B, flat year over year; free cash flow was $2.3B after $4.0B of capex, which rose from $3.8B.
- Net debt ratio rose to 10.7% from 7.0% a year earlier, as total debt increased to $23.2B and cash declined to $4.0B.
- Returned $6.0B to shareholders in the quarter ($3.0B dividends, $3.0B buybacks), marking the ninth straight quarter above $5B; declared a $1.63 quarterly dividend payable September 10, 2024.
- Expanded exploration acreage in Namibia, Angola, Equatorial Guinea, and Brazil, with 15 new blocks secured in the Santos and Pelotas Basins.
03—Questions
Frequently Asked Questions
Why did Chevron's earnings decline compared with the prior year?
Earnings fell to $4.4B from $6.0B mainly because of lower margins on refined product sales, the absence of favorable prior-year tax items, and negative foreign currency effects of $243M. Higher upstream production partly offset these pressures.
Is Chevron's dividend and shareholder return program still on track?
Yes. Chevron declared a $1.63 per share quarterly dividend and returned $6.0B in the quarter, including $3.0B in buybacks. The company has now exceeded $5B of quarterly shareholder returns for nine consecutive quarters and more than $50B over the last two years.
Why did the net debt ratio increase so much?
The net debt ratio rose to 10.7% from 7.0% a year earlier, and from 8.8% in Q1 2024. Total debt increased to $23.2B from $20.8B at year-end 2023, while cash and marketable securities declined to $4.0B from $8.2B, reflecting shareholder returns and capex funded in part by borrowing.
What drove the 11% increase in production?
Production growth came primarily from the integration of PDC Energy, which added legacy assets in the Denver-Julesburg Basin, and strong Permian Basin performance. U.S. output rose 353,000 barrels per day year over year, partly offset by downtime in Australia and the exit from Myanmar.
What are the near-term operational risks investors should watch?
Management cited recent operational downtime and softer margins. Specific issues included turnaround and downtime at the El Segundo refinery, Australian production downtime, and tighter refining margins. The filing's forward-looking statements also flag risks tied to the pending Hess transaction, including regulatory approvals and the Stabroek Block arbitration.
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