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CHEVRON CORP 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

CHEVRON CORP

Filing date:

02/21/2025

TLDR:

Chevron’s 2024 performance reflects challenges in a volatile energy market with decreased earnings despite increased production. The acquisition of Hess presents both opportunities and risks, warranting a cautious approach.

ELI5:

Chevron, like other oil companies, had a mixed year. They made less money even though they produced more oil. They’re also buying another company called Hess, which could be good or bad depending on how it goes.

Accession #:

0000093410-25-000009

Published on

Analyst Summary

  • Revenue decreased from $235.7 billion in 2022 to $193.4 billion in 2024.
  • Net Income decreased from $35.5 billion in 2022 to $17.7 billion in 2024.
  • Return on Capital Employed (ROCE) decreased from 20.3% in 2022 to 10.1% in 2024.
  • Debt Ratio increased from 11.5% in 2023 to 13.9% in 2024.
  • Oil-equivalent production increased from 3.12 million barrels per day in 2023 to 3.34 million barrels per day in 2024.
  • Negative reserve replacement ratio of 4% in 2024.
  • Voluntary attrition rate of 3.1% in 2024.
  • Net Profit Margin decreased by 15.85% from 2023 to 2024.
  • Return on Assets (ROA) decreased by 15.91% from 2023 to 2024.
  • Return on Equity (ROE) decreased by 12.72% from 2023 to 2024.
  • Basic EPS decreased from $11.41 in 2023 to $9.76 in 2024.
  • Diluted EPS decreased from $11.36 in 2023 to $9.72 in 2024.
  • Current Ratio decreased by 17.19% from 2023 to 2024.
  • Quick Ratio decreased by 18.81% from 2023 to 2024.
  • Cash Ratio decreased by 28% from 2023 to 2024.
  • Debt-to-Equity Ratio increased by 23.08% from 2023 to 2024.
  • Debt-to-Assets Ratio increased by 25% from 2023 to 2024.
  • Interest Coverage Ratio decreased by 25.47% from 2023 to 2024.
  • Asset Turnover remained constant at 0.75 from 2023 to 2024.
  • Revenue decreased by 1.78% from 2023 to 2024.
  • Net Income decreased by 17.35% from 2023 to 2024.
  • EPS decreased by 14.43% from 2023 to 2024.
  • Chevron repurchased approximately 29.5 million shares for $152.74 per share, totaling approximately $4.5 billion, during the fourth quarter of 2024.

Opportunities and Risks

  • Commodity Price Volatility: A major risk factor, as highlighted by the decline in earnings due to lower oil and gas prices.
  • Climate Change Regulations: Increasingly stringent regulations could increase operational costs and reduce demand for Chevron’s products.
  • Cybersecurity Threats: Cyberattacks could disrupt operations and compromise sensitive data.
  • Hess Acquisition Risks: Regulatory approvals, potential delays, and integration challenges associated with the Hess acquisition.
  • Political and Economic Instability: Operations in various countries are subject to political and economic risks.
  • Environmental Litigation: Exposure to environmental litigation, including climate change-related lawsuits and coastal erosion claims.
  • Hess Acquisition: Potential for increased production and synergies if the acquisition is successful.
  • Lower Carbon Investments: Growth opportunities in renewable fuels, carbon capture, hydrogen, and other lower-carbon technologies.
  • Permian Basin: Continued development of its advantaged portfolio in the Permian Basin.
  • LNG Market: Expansion of LNG operations to meet growing global demand.

Potential Implications

Stock Price

  • Monitor Commodity Prices: Closely track oil and gas price trends and their impact on Chevron’s profitability.
  • Assess Hess Acquisition Progress: Evaluate the progress of the Hess acquisition, including regulatory approvals and integration plans.
  • Evaluate Carbon Transition Strategy: Analyze the effectiveness of Chevron’s investments in lower-carbon technologies and their potential to generate future revenue.
  • Monitor Litigation: Track the progress of climate change and environmental lawsuits and their potential financial impact.

Chevron Corp (CVX) 2024 10-K Filing Analysis

Executive Summary

This report analyzes Chevron’s 2024 10-K filing, focusing on key financial data, operational performance, risk factors, and management’s discussion. Overall, Chevron presents a mixed picture. While production increased, earnings decreased due to lower commodity prices and increased expenses. The acquisition of Hess presents both opportunities and risks. A cautious approach is warranted, with a “Hold” recommendation.

Company Overview

Chevron Corporation is an integrated energy and chemicals company with operations worldwide. Its business is divided into Upstream (exploration, production, and transportation of crude oil and natural gas) and Downstream (refining, marketing, and transportation of petroleum products and petrochemicals). The company is navigating a complex environment with fluctuating commodity prices, increasing regulatory scrutiny, and the ongoing energy transition.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights a strategy focused on safely delivering lower carbon energy to a growing world. They aim to achieve higher returns, lower carbon intensity, and superior shareholder value. Forward-looking statements are prevalent, emphasizing growth in oil and gas, lower carbon operations, and new businesses in renewable fuels, carbon capture, hydrogen, and power generation. However, the MD&A also acknowledges significant risks, including commodity price volatility, geopolitical instability, and climate change regulations.

Financial Statement Analysis

Key Ratios and Trends

  • Revenue: Decreased from $235.7 billion in 2022 to $193.4 billion in 2024.
  • Net Income: Decreased from $35.5 billion in 2022 to $17.7 billion in 2024.
  • Return on Capital Employed (ROCE): Decreased from 20.3% in 2022 to 10.1% in 2024.
  • Debt Ratio: Increased from 11.5% in 2023 to 13.9% in 2024.
  • Production: Oil-equivalent production increased from 3.12 million barrels per day in 2023 to 3.34 million barrels per day in 2024.

Analysis: The declining revenue and net income, coupled with a decreasing ROCE, suggest weakening profitability. The increased debt ratio indicates higher leverage. Increased production is a positive sign, but it’s not enough to offset the negative trends.

Segment Performance

Upstream: Earnings decreased from $30.3 billion in 2022 to $18.6 billion in 2024. While production increased, lower commodity prices and higher operating expenses impacted profitability.

Downstream: Earnings decreased from $8.2 billion in 2022 to $1.7 billion in 2024. Lower refining margins were the primary driver of this decline.

Analysis: Both Upstream and Downstream segments experienced significant earnings declines, highlighting the company’s vulnerability to commodity price fluctuations and refining margin pressures.

Uncommon Metrics

  • Reserve Replacement Ratio: Negative 4% in 2024.
  • Voluntary Attrition Rate: 3.1% in 2024.

Analysis: A negative reserve replacement ratio is concerning, indicating that Chevron is not replacing its produced reserves. The low voluntary attrition rate suggests employee satisfaction, which is a positive indicator of organizational health.

Risk and Opportunity Assessment

Risks

  • Commodity Price Volatility: A major risk factor, as highlighted by the decline in earnings due to lower oil and gas prices.
  • Climate Change Regulations: Increasingly stringent regulations could increase operational costs and reduce demand for Chevron’s products.
  • Cybersecurity Threats: Cyberattacks could disrupt operations and compromise sensitive data.
  • Hess Acquisition Risks: Regulatory approvals, potential delays, and integration challenges associated with the Hess acquisition.
  • Political and Economic Instability: Operations in various countries are subject to political and economic risks.
  • Environmental Litigation: Exposure to environmental litigation, including climate change-related lawsuits and coastal erosion claims.

Opportunities

  • Hess Acquisition: Potential for increased production and synergies if the acquisition is successful.
  • Lower Carbon Investments: Growth opportunities in renewable fuels, carbon capture, hydrogen, and other lower-carbon technologies.
  • Permian Basin: Continued development of its advantaged portfolio in the Permian Basin.
  • LNG Market: Expansion of LNG operations to meet growing global demand.

Conclusion and Actionable Insights

Chevron’s 2024 performance reflects the challenges of operating in a volatile energy market. While the company is making efforts to diversify into lower-carbon businesses, its financial performance remains heavily reliant on oil and gas prices. The Hess acquisition presents both significant opportunities and considerable risks.

Overall Assessment: Hold

Recommendations:

  • Monitor Commodity Prices: Closely track oil and gas price trends and their impact on Chevron’s profitability.
  • Assess Hess Acquisition Progress: Evaluate the progress of the Hess acquisition, including regulatory approvals and integration plans.
  • Evaluate Carbon Transition Strategy: Analyze the effectiveness of Chevron’s investments in lower-carbon technologies and their potential to generate future revenue.
  • Monitor Litigation: Track the progress of climate change and environmental lawsuits and their potential financial impact.

Chevron Corporation Financial Analysis – 2024

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: (Sales and Other Operating Revenues – Purchased Crude Oil and Products) / Sales and Other Operating Revenues = ($193,414 – $119,206) / $193,414 = 38.36%
    • Trend: Previous year’s gross profit margin is not directly calculable from the provided data.
    • Industry: Compared to the Oil & Gas industry, Chevron’s gross profit margin is in line with integrated oil companies.
  • Operating Profit Margin:

    • Calculation: Operating Income / Sales and Other Operating Revenues = ($193,414 – $175,286) / $193,414 = 9.37%
    • Trend: Previous year’s operating profit margin is not directly calculable from the provided data.
    • Industry: Chevron’s operating profit margin is competitive within the integrated oil and gas sector.
  • Net Profit Margin:

    • Calculation: Net Income Attributable to Chevron Corporation / Sales and Other Operating Revenues = $17,661 / $193,414 = 9.13%
    • Trend: 2023 Net Profit Margin = $21,369 / $196,913 = 10.85%. Percentage Change = (9.13 – 10.85) / 10.85 = -15.85%
    • Industry: Chevron’s net profit margin is strong, reflecting efficient operations and cost management.
  • Return on Assets (ROA):

    • Calculation: Net Income Attributable to Chevron Corporation / Total Assets = $17,661 / $256,938 = 6.87%
    • Trend: ROA in 2023 = $21,369 / $261,632 = 8.17%. Percentage Change = (6.87 – 8.17) / 8.17 = -15.91%
    • Industry: Chevron’s ROA indicates effective asset utilization in generating profits.
  • Return on Equity (ROE):

    • Calculation: Net Income Attributable to Chevron Corporation / Total Chevron Corporation Stockholders’ Equity = $17,661 / $152,318 = 11.59%
    • Trend: ROE in 2023 = $21,369 / $160,957 = 13.28%. Percentage Change = (11.59 – 13.28) / 13.28 = -12.72%
    • Industry: Chevron’s ROE is a good indicator of profitability relative to shareholder equity.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Basic EPS: $9.76
    • Diluted EPS: $9.72
    • Trend: Basic EPS decreased from $11.41 in 2023, Diluted EPS decreased from $11.36 in 2023.
    • Industry: Chevron’s EPS is a key metric for investors, reflecting the company’s profitability on a per-share basis.

Liquidity

  • Current Ratio:

    • Calculation: Current Assets / Current Liabilities = $40,911 / $38,558 = 1.06
    • Trend: Current Ratio in 2023 = $41,128 / $32,258 = 1.28. Percentage Change = (1.06 – 1.28) / 1.28 = -17.19%
    • Industry: A current ratio above 1 indicates that Chevron has sufficient current assets to cover its current liabilities.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Current Assets – Inventories) / Current Liabilities = ($40,911 – $9,074) / $38,558 = 0.82
    • Trend: Quick Ratio in 2023 = ($41,128 – $8,612) / $32,258 = 1.01. Percentage Change = (0.82 – 1.01) / 1.01 = -18.81%
    • Industry: The quick ratio provides a more conservative view of Chevron’s liquidity, excluding inventories.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents) / Current Liabilities = $6,781 / $38,558 = 0.18
    • Trend: Cash Ratio in 2023 = $8,178 / $32,258 = 0.25. Percentage Change = (0.18 – 0.25) / 0.25 = -28%
    • Industry: The cash ratio indicates Chevron’s ability to cover current liabilities with its most liquid assets.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Debt / Total Chevron Corporation Stockholders’ Equity = $24,541 / $152,318 = 0.16
    • Trend: Debt-to-Equity Ratio in 2023 = $20,836 / $160,957 = 0.13. Percentage Change = (0.16 – 0.13) / 0.13 = 23.08%
    • Industry: Chevron’s debt-to-equity ratio is relatively low, indicating a conservative capital structure.
  • Debt-to-Assets Ratio:

    • Calculation: Total Debt / Total Assets = $24,541 / $256,938 = 0.10
    • Trend: Debt-to-Assets Ratio in 2023 = $20,836 / $261,632 = 0.08. Percentage Change = (0.10 – 0.08) / 0.08 = 25%
    • Industry: Chevron’s debt-to-assets ratio is a measure of its financial leverage.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Earnings Before Interest and Taxes / Interest Expense = $28,226 / $773 = 36.52
    • Trend: Interest Coverage Ratio in 2023 = $30,234 / $617 = 49.00. Percentage Change = (36.52 – 49.00) / 49.00 = -25.47%
    • Industry: Chevron’s interest coverage ratio is very high, indicating a strong ability to meet its interest obligations.

Activity/Efficiency

  • Asset Turnover:

    • Calculation: Sales and Other Operating Revenues / Total Assets = $193,414 / $256,938 = 0.75
    • Trend: Asset Turnover in 2023 = $196,913 / $261,632 = 0.75. Percentage Change = (0.75 – 0.75) / 0.75 = 0%
    • Industry: Chevron’s asset turnover ratio reflects its efficiency in generating revenue from its assets.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $156.92 / $9.72 = 16.14
    • Trend: To determine the trend, we would need the P/E ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The P/E ratio is a common metric for valuing stocks, comparing the stock price to earnings per share.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Book Value of Equity = (Shares Outstanding * Stock Price) / Total Chevron Corporation Stockholders’ Equity = (1,769,012,274 * $156.92) / $152,318,000,000 = 1.82
    • Trend: To determine the trend, we would need the P/B ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The P/B ratio compares a company’s market capitalization to its book value of equity.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Sales and Other Operating Revenues = (Shares Outstanding * Stock Price) / Sales and Other Operating Revenues = (1,769,012,274 * $156.92) / $193,414,000,000 = 1.43
    • Trend: To determine the trend, we would need the P/S ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The P/S ratio compares a company’s market capitalization to its revenue.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: (Market Cap + Total Debt – Cash and Cash Equivalents) / (Net Income + Interest Expense + Taxes + Depreciation, Depletion and Amortization) = (($156.92 * 1,769,012,274) + $24,541 – $6,781) / ($17,661 + $594 + $9,757 + $17,282) = 9.01
    • Trend: To determine the trend, we would need the EV/EBITDA ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The EV/EBITDA ratio is a valuation metric that compares a company’s enterprise value to its earnings before interest, taxes, depreciation, and amortization.

Growth Rates

  • Revenue Growth:
    • Calculation: (2024 Revenue – 2023 Revenue) / 2023 Revenue = ($193,414 – $196,913) / $196,913 = -1.78%
    • Trend: Revenue decreased by 1.78%
  • Net Income Growth:
    • Calculation: (2024 Net Income – 2023 Net Income) / 2023 Net Income = ($17,661 – $21,369) / $21,369 = -17.35%
    • Trend: Net Income decreased by 17.35%
  • EPS Growth:
    • Calculation: (2024 EPS – 2023 EPS) / 2023 EPS = ($9.72 – $11.36) / $11.36 = -14.43%
    • Trend: EPS decreased by 14.43%

Other Relevant Metrics

  • Share Repurchases: Chevron repurchased approximately 29.5 million shares for $152.74 per share, totaling approximately $4.5 billion, during the fourth quarter of 2024. This indicates a commitment to returning value to shareholders.
  • Agreement to Acquire Hess Corporation: The agreement to acquire Hess Corporation is a significant development. While the financial implications are not fully detailed in this filing, the acquisition is expected to expand Chevron’s production and reserve base, particularly in Guyana.

2. Commentary

Chevron’s financial performance in 2024 reflects a decrease in profitability compared to 2023, with declines in net income, EPS, ROA, and ROE. Despite these declines, the company maintains a strong financial position, characterized by a low debt-to-equity ratio and a high-interest coverage ratio. Revenue experienced a slight decrease, while the company continued its commitment to returning value to shareholders through significant share repurchases. The pending acquisition of Hess Corporation represents a strategic move to enhance Chevron’s long-term growth prospects.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️