Chevron(CVX) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Chevron reported fourth quarter earnings of $2.8 billion or $1.39 per share, with adjusted earnings of $3 billion or $1.52 per share, reflecting a decrease of roughly $600 million compared to the previous quarter [9][10] - Cash flow from operations was $10.8 billion for the quarter, including a $1.7 billion drawdown in working capital [9] - Adjusted free cash flow for the year was $20 billion, with a record cash return to shareholders [10][15] Business Line Data and Key Metrics Changes - Upstream earnings decreased primarily due to lowered liquids prices, while downstream earnings were lower due to reduced chemicals earnings and refining volumes [10] - Production reached record levels globally and in the U.S., with net oil-equivalent production growth at the top end of the 6%-8% guidance range for 2025 [11][12] - The company achieved over 35% year-over-year growth in adjusted free cash flow, despite a nearly 15% decline in oil prices [5] Market Data and Key Metrics Changes - Chevron's operations in Venezuela have increased production by over 200,000 barrels per day since 2022, with potential for an additional 50% growth in the next 18-24 months [5][30] - The Eastern Mediterranean assets are expected to contribute to a doubling of current earnings and free cash flow, with Leviathan reaching FID for expansion [6][42] Company Strategy and Development Direction - Chevron is focused on free cash flow growth and capital discipline, with a break-even below $50 Brent [14][15] - The company aims to continue its structural cost reduction program, targeting $3 billion-$4 billion in savings by the end of 2026 [14] - Chevron is strategically positioned to leverage its diversified portfolio and maintain shareholder returns, having returned over $100 billion in dividends and buybacks over the last four years [15][66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2026 from a position of strength, with expectations for continued growth in cash flow driven by low-risk production growth and ongoing cost savings [8][10] - The company is committed to maintaining a disciplined approach to capital allocation, focusing on high-value opportunities while managing through cycles [15][66] Other Important Information - Chevron's balance sheet remains strong, with a net debt coverage ratio of 1x, providing resilience and flexibility for future investments [10][15] - The company has restructured its operating model to enhance efficiency and streamline processes, with a focus on leveraging technology across its operations [14][49] Q&A Session Summary Question: TCO volumes and maintenance schedule - Management discussed the recent power distribution issue at TCO and the proactive measures taken to resume production, with expectations for optimized maintenance schedules to reduce downtime [20][22] Question: Venezuela operations and resource potential - Management confirmed uninterrupted operations in Venezuela, with production currently at around 250,000 barrels per day and potential for significant growth, emphasizing the importance of stability and fiscal predictability in the region [30][32] Question: Tengiz compensation cuts and production expectations - Management indicated that historical trends suggest TCO production is less likely to be impacted by compensation cuts, although specific future agreements are uncertain [37] Question: Eastern Mediterranean developments - Management highlighted ongoing projects in the Eastern Mediterranean, including Tamar and Leviathan, with expectations for increased production and cash flow growth [41][42] Question: Cost reduction progress and organizational changes - Management reported $1.5 billion in savings from the cost reduction program, with expectations for further efficiencies as the new organizational model is fully implemented [47][49] Question: Permian strategy and capital efficiency - Management confirmed that the Permian is expected to maintain production at 1 million barrels per day, with ongoing improvements in capital efficiency and cash generation [53][54] Question: Opportunities in Libya and Iraq - Management acknowledged ongoing discussions in Libya and Iraq, emphasizing the need for competitive fiscal terms and attractive investment opportunities [59][60] Question: LNG portfolio and future opportunities - Management stated that while Chevron has a smaller LNG portfolio compared to peers, the company remains open to opportunities that deliver competitive returns [61]