Chevron Soars 12% in 3 Months: Should You Hold the Stock or Exit?

Core Viewpoint - Chevron Corporation's stock has increased over 12% in the last three months, outperforming the energy sector and S&P 500, as well as rivals ExxonMobil and Shell, indicating strong investor interest and confidence in the company's performance [1][9]. Performance Analysis - Chevron's stock price surpassed key moving averages, forming a "golden cross" pattern in mid-August, which is a technical indicator of a strong upward trend [3]. - The company's U.S. production saw significant growth in Q2 2025, primarily due to the low-cost operations in the Permian Basin, with plans to produce over 1 million barrels of oil per day by 2027 [11]. Strategic Developments - Chevron's acquisition of Hess has been completed, granting a 30% stake in the Stabroek oil block in Guyana, expected to increase oil production by up to 500,000 barrels per day and cash flow by $1 billion by year-end [12]. - The merger added 301 million new shares, prompting Chevron to buy back over half of these shares to maintain existing shareholder value [13]. Financial Management - In Q2 2025, Chevron generated $8.6 billion in cash from operations and produced $4.9 billion in free cash flow, demonstrating strong financial management despite lower oil prices [15]. - The company paid out $2.9 billion in dividends and spent $2.7 billion on share buybacks, with expectations for higher shareholder payouts in 2025 compared to 2024 [16]. Challenges - Chevron's earnings in Q2 2025 fell 35% to $3.1 billion, largely due to a 20% drop in the average price received for oil in the U.S., highlighting the company's sensitivity to oil price fluctuations [17]. - The stock is trading at a forward P/E multiple above the industry average, raising valuation concerns, especially as Chevron's return on capital employed (ROCE) has decreased from around 20% in 2023 to just over 8% [19][21]. Market Conditions - The refining business saw a profit increase of 23.5% in Q2 2025, but overall profit margins are weaker than in 2024, with international refining facing challenges from maintenance and lower profit spreads [22]. - Liquefied natural gas (LNG) profits are under pressure due to a global slowdown, with lower demand and increased supply affecting prices, which could pose additional challenges for Chevron [23].