Chevron

Chevron spent more than $5 billion on dividends and buybacks in the past quarter alone

Chevron’s CEO boasted the company returned over $5 billion to shareholders for the second quarter in a row. “Mike Wirth — Chairman and Chief Executive Officer: Thank you, Roderick, and thanks, everyone, for joining us today. We continue to see a challenging and dynamic macroeconomic and geopolitical environment. Current events highlight the importance of balancing economic prosperity, energy security, and environmental protection. In line with these three imperatives, Chevron remains focused on our objective to safely deliver higher returns and lower carbon. During the third quarter, we continued to make progress by delivering return on capital employed in the mid-20s, returning more than $5 billion to shareholders for the second quarter in a row and investing to grow both our traditional and new energy businesses.” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron’s CEO: “we’ve actually increased our rate of buybacks three times this year…we’re at an all-time high in terms of the rate of share repurchases.” “Mike Wirth — Chairman and Chief Executive Officer: Yes. John, we’ve actually increased our rate of buybacks three times this year. We announced the first one at the end of last year. So we’ve steadily moved the range up and the purchases up. And so we’re at an all-time high in terms of the rate of share repurchases. And you’re right. We’ve got strong cash flow right now, which allows us to support all of our financial priorities and maintain the strong balance sheet. I think the thing that I just would reemphasize is we want to maintain the buyback program throughout the cycle” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron told analysts it had increased its dividend 6%, calling that that their “first financial priority.” “Pierre Breber — Chief Financial Officer: I’ll just point out that we increased our dividend 6% earlier this year. We’ve been growing our dividend at a compounded annual growth rate of 6% for 15 years. And that is our first financial priority. So there’s a lot of tension on the buyback, but it’s clearly our fourth priority after sustaining and growing the dividend, investing to grow both traditional and new energy businesses, maintaining a strong balance sheet. And as Mike said, we intend to do it across the cycle for multiple years” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron told analysts that it was expecting low growth in their production despite spending billions on shareholders

Chevron spent more on funneling money to shareholders than the $3 billion it spent on Capital Expenditures, crowing the company was “ on track to beat 2021’s free cash flow record.”“Pierre Breber — Chief Financial Officer: Thanks, Mike. Third quarter financial results were strong. Included in the quarter were $177 million of pension settlement costs and positive foreign currency exchange effects of $624 million. The appendix of this presentation contains a reconciliation of non-GAAP measures. We repurchased shares at the high end of our guidance range and ended the quarter with a net debt ratio under 5%. Cash capex was $3 billion, up over 50% from last year. For the sixth consecutive quarter, Chevron’s free cash flow exceeded $5 billion. We’re on track to beat 2021’s free cash flow record.” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron told analysts they were “seeing production level out” after an initial surge and predicted it would grow at the “lower end” of their range. “Mike Wirth — Chairman and Chief Executive Officer: And you saw that through the back half of last year and certainly the first part of this year, which may have misled a little bit in terms of the rate of growth because this was this kind of surge capacity. We’re back to Factor VIII drilling now. Our DUC inventory is kind of in line with what our plan would suggest it would be. And so we’re seeing production level out at a growth rate that is more the kind of underlying rate that you should see. So we likely will be toward the lower end of the range. We get some nonratable bookings from our non-operated joint ventures. We give you a range because we expect to be in the range, but we don’t always hit the high end of the range. So in this case, we’ll be toward the lower end. But we’re not changing guidance for this year or our forward guidance.” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron told analysts it was benefitting from a tight global market and predicted the industry would see even more consolidation

Chevron’s CEO: “so you had a constraint or a reduction in refining capacity that occurred over the last couple of years in a way we really haven’t seen previously. “Mike Wirth — Chairman and Chief Executive Officer: Sure. It’s been an interesting couple of years in the refining sector, Neil. With COVID, we actually saw through that period of time, some refineries shut down around the world that maybe at a rate greater than we would have expected before as the economics really collapsed, as demand collapsed. There were — been some refineries in the U.S. that have been taken offline after storm damage or operating incidents that are not coming back. We see others being converted to renewable diesel. And so you had a constraint or a reduction in refining capacity that occurred over the last couple of years in a way we really haven’t seen previously. And the other thing that happened is some of the new builds that are in various stages of development, primarily in the Middle East or Asia, slowed down during COVID.” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron’s CEO predicted the refinery market would remain constrained for the near year: “we’re in a market that we really haven’t seen probably in my career in terms of the overall tightness on supply and demand.”“Mike Wirth — Chairman and Chief Executive Officer: And a lot of the industry slowed activity until we had a better view on how we were going to come through that period of time. I think those will come back into developments and eventually online which will ease some of these global constraints. But the system is tight right now. And what you see is when you have some maintenance that runs along, some unplanned events, as we’ve seen on the West Coast, or when you see things like the strike that we’ve seen in France here recently, markets tighten up really quickly. And that sends a price signal to try to bring supplies in from further away. And so the entire refining complex right now is a little more tightly balanced than it historically has been. And I think in the short term, if you want to call that the next year, plus or minus, probably stays that way, maybe a little bit longer to some degree. And then I think as you see some of this new capacity come online, we get back into a situation where it’s not quite as finely balanced as it is today. But to no doubt, we’re in a market that we really haven’t seen probably in my career in terms of the overall tightness on supply and demand.” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron’s CEO: “ I think in the oil and gas business, there’s likely to be some more consolidation. You need fewer and stronger companies that normally happens at the bottom of the cycle rather than at the top of the cycle.” “Mike Wirth — Chairman and Chief Executive Officer: And so we don’t need to do a deal unless it really improves on what we expect to deliver otherwise. So I would just say we’re going to continue to be very disciplined. We don’t have an open checkbook even when times are good like this, especially when times are good like this. We walked away from a deal a few years ago rather than chase value out of it. We’ve sold assets out of our portfolio at well times. And as you say, the last couple of deals were done at a pretty good time. So over time, I think in the oil and gas business, there’s likely to be some more consolidation. You need fewer and stronger companies that normally happens at the bottom of the cycle rather than at the top of the cycle.” (Chevron Q3 2022 Earnings Call, 10/28/2022)

Chevron reported one of its most profitable quarters ever even though their overall oil production had decreased

Chevron’s CFO celebrated that the company had one of its best quarters since 2008, over $5 billion more than the previous quarter, “primarily on higher refining margins.” “Pierre Breber — Chief Financial Officer: Thank you, Roderick, and thanks, everyone, for joining us today. We delivered another strong quarter, another quarter of strong financial results with ROCE over 25%, the highest since 2008. Special items this quarter include asset sale gains of $200 million and a $600 million charge to terminate early a long-term LNG regas contract at Sabine Pass. C&E for the quarter was nearly $4 billion, including inorganic spend to form our JV with Bunge. With the acquisition of REG, our total investment was $6.8 billion, more than double last year’s quarter. Strong cash flow enabled us to fund this higher level of investment, pay down debt for the fifth consecutive quarter, and returned more than $5 billion to our shareholders through dividends and buybacks. Adjusted second quarter earnings were up more than $8 billion versus last year. Adjusted upstream earnings increased mainly on higher realizations partially offset by lower liftings from the end of concessions and Indonesia and Thailand. Adjusted downstream earnings increased primarily on higher refining margins. Compared with last quarter, adjusted earnings were up nearly $5 billion. Adjusted upstream earnings increased primarily on higher realizations, partially offset by tax and other items, including higher withholding taxes on TCO dividends and cash repatriations. Adjusted downstream earnings increased primarily on higher refining margins and a favorable swing in timing effects.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Despite the massive increase in profits, Chevron said their oil production actually decreased by about 7%. “Jay Johnson — Executive Vice President, Upstream: Thanks, Pierre. Second quarter oil equivalent production decreased about 7% year on year due to expiration of our contracts in both Indonesia and Thailand, the sale of our Eagle Ford asset, and CPC curtailments impacting TCO during April. This was partially offset by shale and tight growth, primarily in the Permian. In the Permian, we’re delivering on our objectives of higher returns and lower carbon.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron described their engagement with the White House as “constructive and productive,” saying US based production was up up 7%. “Pierre Breber — Chief Financial Officer: Manav, we won’t comment on the specifics of our engagements. I think you’re right that we’re — it’s constructive and productive. I’ll point out our U.S. oil and gas production in the first half of the year was up 7% versus last year. Our U.S. refined product sales up 10% versus last year. The administration wants energy supplies to increase, we’re doing that. Our investment globally, up 80% first half of the year. If you look at the U.S., more than double when you include REG. So Chevron is growing energy supply, increasing investment, and we’re engaging constructively with Congress and this administration. Thanks, Manav.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron told analysts it was now planning to increase stock buybacks to $15 billion per year

Chevron announced it was increasing their stock buybacks guidance to $15 billion for the year. “Pierre Breber — Chief Financial Officer: In downstream, planned turnarounds are primarily at our California refineries. We do not expect significant dividends from TCO or Angola LNG until the fourth quarter. Our full year guidance for affiliate dividends is unchanged, with upside potential beyond the top of the range depending on commodity prices. Also, we increased the top end of our share buyback guidance range to $15 billion per year and expect to be at that rate during the third quarter.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron’s CFO emphasized their share buyback guidance was $15 billion per year and “ we intend to maintain buybacks at this annual rate for a number of years across the commodity cycle”“Pierre Breber — Chief Financial Officer: And as you said, we just increased the guidance to — we just increased the top of the range of our guidance to $15 billion a year. That represents about 1% of our shares each quarter. The $15 billion annual rate is based on our current outlook. It was tested against a number of scenarios. The rate is consistent with our Investor Day upside leverage case, which was a $75 (Inaudible) flat nominal price over five years. As we’ve said with previous buyback rates, we intend to maintain buybacks at this annual rate for a number of years across the commodity cycle. As a reminder, our net debt is well below our mid-cycle guidance range. So we’ll continue buybacks even when the commodity cycle turns down and we’ll lever back up our balance sheet closer to that 20% to 25% guidance range.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron’s CFO: “The first financial priority is to grow the dividend. We’ve done that for 35 consecutive years, increased it 6% earlier this year. It’s up 20% since right before COVID, and it’s doubled since 2010.”“Pierre Breber — Chief Financial Officer: Thanks, Neil. It’s Pierre. I’ll take that. I’ll go through our financial priorities. They’ve been consistent for decades, literally. The first financial priority is to grow the dividend. We’ve done that for 35 consecutive years, increased it 6% earlier this year. It’s up 20% since right before COVID, and it’s doubled since 2010. The second is to invest and grow both traditional and new energy, and you saw that our total investments first half of the year were up 80% versus a year ago. The third is to maintain a strong balance sheet. For the fifth consecutive quarter, we paid down debt. Our net debt ratio is at 8%.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron emphasized it was not seeking to increase production significantly, but was “focused on generating returns”

Chevron told analysts the company “has been to be very disciplined, very focused on generating the returns and the efficiency that allow us to be profitable regardless of the prices. And so we’re not responding to short-term price.” “Jay Johnson — Executive Vice President, Upstream: Yep. I’ll start out with that and then Pierre can finish if he’s got any other thoughts. The Permian — our approach to the Permian, as you know, for many years, has been to be very disciplined, very focused on generating the returns and the efficiency that allow us to be profitable regardless of the prices. And so we’re not responding to short-term price, but we are increasing our activity levels since the turn down during COVID. And so we have seen our investment go up. This year, it’s $1 billion higher than it was last year. (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron said it was expecting a 15% increase in Permian oil production and “then I would expect to see it relatively flat after that as we just maintain an efficient operation across the Permian.” “Jay Johnson — Executive Vice President, Upstream: And we also see the number of wells that we’re putting on production going up, we expect to do over 200 (Inaudible) this year. And so we’re looking for about a 15% increase in our Permian production. And then I would expect to see it relatively flat after that as we just maintain an efficient operation across the Permian. We also have non-operated activity, and we currently have about 9 net rigs running on the non-op side. And so that also contributes significantly to our production profile. Our guidance remains unchanged. We’d expect to see about 1.2 million to 1.5 million barrels a day of production ultimately as our plateau. But as we continue to gain insights and knowledge and as we look at our efficiencies, as we look at our portfolio and world demand, that can change as we go forward. That’s our guidance as we see it today, and we’ll continue to update you as we move forward in time.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron’s EVP: “ think we’ve accomplished a mindset shift in Chevron, and this is throughout our workforce, being very focused on returns, not chasing a production target, but continuing to run this as a business and thinking about the returns we can get.” “Jay Johnson — Executive Vice President, Upstream: Thanks for the question, and it’s pretty exciting. I mean the one bad thing about retirement is you don’t get to be part of the next steps, and I’m excited about them. I would start by just saying, I think we’ve accomplished a mindset shift in Chevron, and this is throughout our workforce, being very focused on returns, not chasing a production target, but continuing to run this as a business and thinking about the returns we can get. Scale is important, but it’s an outcome of the opportunity set that we have and the investments and capital that we choose to invest. (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron downplayed inflation and recession costs, saying the company was focused on “more free cash flow for shareholders”

Chevron’s EVP said the company was less affected by inflation thanks to multi year contracts and years of infrastructure investment. “Jay Johnson — Executive Vice President, Upstream: It’s difficult for me to really do that definitively. What I can say, though, is I think we have a competitive advantage in the Permian. We have a couple of things working in our favor. We maintain a global supply chain and we’re able to tap suppliers of both equipment and materials, goods, and services over a much broader range than maybe some of our competitors. We also do multiyear contracts and other mechanisms commercially that allow us to mitigate some of the inflationary pressures that we see today. And then, of course, our focus on driving for improved productivity, improved efficiency has really helped us continue to counter the inflationary pressures. I think the other area that we have a distinct advantage is we’ve been building out our infrastructure in the Permian. And so just as a proof point, the last 800 wells over the last five years, to produce those 800 wells, we had to build 40 central tank batteries. As we look forward, the next 800 wells, we only need to build an additional four central tank batteries. So while others are having to invest in this high inflationary period, we’re largely using infrastructure that was built over the past five years with very small incremental surface facilities required. And I think that’s going to be hard for others to match.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron’s CFO said the company had “seen cost inflation this year in the single digits,” with lower inflation outside of the US. “Pierre Breber — Chief Financial Officer: Thanks, Paul. I’ll take the first, and then I’ll hand it to Jay on the second. On the onshore U.S., we’ve seen cost inflation this year in the single digits. We’ve been able to mitigate a part of that through good planning, smart procurement, and good relationships with suppliers. And as Jay pointed out, we’ve been able to also get more efficient with our drilling and completion operations, which also partially offsets it. Outside of the U.S., we’re seeing much more modest inflation, and we talked about our Gulf of Mexico offshore rigs, which are contracted at a time when the rig rates were lower. As we’re looking toward 2023, we’re doing that work right now. We’re confident that we’ll be able to secure all the goods and services that were needed for our program.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron downplayed recession predictions, saying that demand was “more recession resilient going forward.” “Pierre Breber — Chief Financial Officer: I mean what’s interesting is there’s obviously concerns around the recession. In terms of tailwinds, we still have very low unemployment, and we have a consumer that wants to spend money to go out and do things they haven’t been able to do for a couple of years. When prices were higher in the second quarter, they made some choices. And if you look at that demand response on gasoline, that’s in line or even higher than some past recession. So it’s not clear. I guess what I’d say is demand, I think, will be much more recession resilient going forward just because we’ve seen a little bit of that response in the second quarter. And again, diesel will be tied to underlying commercial activity.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron’s CFO: “our upstream business is much more capital efficient than it’s ever been. And has a mindset of how do we deliver business results with less capital. And if we do that, there’s more free cash flow for shareholders.”“Pierre Breber — Chief Financial Officer: And of course, all the activities we’re doing to grow new energies. We can do all of that within the guidance. And as we recognize, Jay, one of the things he deserves a lot of credit for is our upstream business is much more capital efficient than it’s ever been. And has a mindset of how do we deliver business results with less capital. And if we do that, there’s more free cash flow for shareholders.” (Chevron Q2 2022 Earnings Call, 7/29/2022)

Chevron’s CEO told analysts the company had cut back on capital spending in favor of share buybacks and expanded dividends

Chevron’s CEO touted a “higher dividend,” share buybacks, and a “a disciplined capital program, well below budget” as their 2021 financial priorities. “Mike Wirth — Chairman and Chief Executive Officer: Chevron is an even better company today than we were just a few years ago. We’re showing it through our actions and our performance, which we expect to drive higher returns and lower carbon. And we intend to keep getting better. Our record free cash flow enabled us to strongly address all four of our financial priorities in 2021: a higher dividend for the 34th consecutive year; a disciplined capital program, well below budget; significant debt paydown with a year-end net debt ratio comfortably below 20% and another year of share buybacks, our 14th out of the past 18 years.” (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron’s CEO bragged “In just two years, capex was reduced by almost half from Chevron and Noble’s pre-COVID total.” “Mike Wirth — Chairman and Chief Executive Officer: I expect 2022 will be even better for cash returns to shareholders with another dividend increase announced this week and first quarter buybacks projected at the top of our guidance range. We’re optimistic about the future, focused on continuing to reward our shareholders while investing to grow our businesses and maintaining a strong balance sheet. We made the most of this challenging period, transforming Chevron through a well-timed acquisition and an enterprise-wide restructuring into a leaner and more productive company. In just two years, capex was reduced by almost half from Chevron and Noble’s pre-COVID total.” (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron’s CEO said the company had gone through a “structural downshift” in capital spending: ”Our production guidance has not changed. And so what we have is a portfolio… which allows us to return more capital to shareholders.“Mike Wirth — Chairman and Chief Executive Officer: Yes. It’s the capital efficiency is the big driver, Alastair. So you’re right. The commodity price environments in those two years are pretty similar. Cash from ops, pretty similar, although there can be some moving parts in there that are not necessarily just commodity price. But we have capital spend that is significantly down from that period of time, which means free cash flow is significantly higher. And our belief going forward, our capital guidance going forward is $15 billion to $17 billion for the next five years. It has come down from $19 billion to $22 billion pre-COVID. So that’s a structural downshift. Our production guidance has not changed. And so what we have is a portfolio that is generating free cash flow and future cash flows in a much more capital-efficient manner which allows us to return more capital to shareholders. So that’s the simple story.” (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron’s CEO: “the last two quarters have been the best two quarters the company has ever seen. And last year was 25% higher than the best year in our history. So we increased the dividend.” “Mike Wirth — Chairman and Chief Executive Officer: Yes. We will talk about that more in March, Phil. But our longer-term view on the pricing environment hasn’t changed a lot. There’s a lot of resource out there that can be produced economically at prices lower than what we see today. And our breakeven reflects that. And so we are in a period of time here where cash flow is strong. As we mentioned in our comments, the last two quarters have been the best two quarters the company has ever seen. And last year was 25% higher than the best year in our history. So we increased the dividend. Debt came down significantly. And we’ve guided to the high end of our share repurchase range. If we continue to see an environment like this, the balance sheet doesn’t need to be a lot stronger than it is today. And we’ve already increased the dividend and we’re going to be disciplined on capital. And so that really leaves one lever left. And I think over time, you should expect us to be consistent with our history, which is returning cash through share repurchases. And at least in an environment like this, we’ve got ample cash to do that and sustain that well into any kind of a correction that we eventually will see. (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron’s CEO said “we pulled the handbrake pretty hard in 2020, we throttled a lot of things down” and that it would take time to adjust.“Mike Wirth — Chairman and Chief Executive Officer: And on 2021, Devin, there’s nothing noteworthy in the profile of capex and what it was that drove the ultimate outcome, which was a little below what we had guided to. There’s a lot of inertia in some of these things. And as we pulled the handbrake pretty hard in 2020, we throttled a lot of things down. And as we start to bottom out and turn that back around a little bit as we will in 2022, this system just needs to adjust to that. And so I wouldn’t call out anything there that’s unique or especially noteworthy. (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron’s CEO said high prices would not lead them to raise production

Chevron’s CEO: “we’re not going to get out ahead of ourselves chasing anything as we bring activity back up… I don’t think we’re going to be tempted by the price of the day to put that at risk by doing more.” “Mike Wirth — Chairman and Chief Executive Officer: In theory, the answer to that five years ago was yes. The answer to that today is yes. We’ve been very focused on execution efficiency and returns. And as I said, we laid out in March of last year a profile that showed strong production growth, long plateau, strong returns and capital efficiency. We’ll update that again here in the new year at March. But this is an asset that just continues to look as good as we’ve portrayed it to you, and we’re not going to get out ahead of ourselves chasing anything as we bring activity back up from $2 billion last year to $3 billion. That’s a 50% increase in capital spend. I mentioned that we’re going to see a 50% increase in wells put on production in ’22 versus ’21. That is a meaningful step-up in activity, and we want to execute that well. And so I don’t think we’re going to be tempted by the price of the day to put that at risk by doing more. And I think Pierre already addressed inflation. I don’t know, Pierre, if there’s anything else you’d like to say on either of those topics. (Chevron Q4 2021 Earnings Call, 1/28/2022)

When pressed on whether Chevron would invest more in production, the CEO demurred: “we intend to stay within that range as we’ve guided.” “Mike Wirth — Chairman and Chief Executive Officer: And on longer-term capex, if I caught your question, Jason. Look, we give this range of $15 billion to $17 billion we’ve put out there. We’re at the low end of the range this year. Now that’s a 30% step-up from where we finished 2021. And as I mentioned earlier, in a place like the Permian, it’s a 50% step-up. So it’s not a trivial change, but it’s still a very disciplined approach to that business. And we intend to stay within that range as we’ve guided. Can we move around within it? Yes.” (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron CEO: “I think the overarching message that investors should take away is, we’re going to stay disciplined on capital. We’re not chasing price.” “Mike Wirth — Chairman and Chief Executive Officer: Can that include additional short cycle? Yes. And as the project in Kazakhstan winds down, that opens up some capacity within that range to allocate capital to other high-return investments. And so we’ve got plenty of levers to pull. But I think the overarching message that investors should take away is, we’re going to stay disciplined on capital. We’re not chasing price. We’re improving returns and you can count on us to continue to do that. And we should generate very strong free cash flow in this environment.” (Chevron Q4 2021 Earnings Call, 1/28/2022)

Chevron’s CEO told Bloomberg: “We could afford to invest more. The equity market is not sending a signal that says they think we ought to be doing that.” “One reason executives are wary to plow investment dollars into new supply is shareholders haven’t shown they’re in their corner. They want cash returned to them immediately rather than seeing it re-invested in new developments. Although soaring commodities markets are “signaling we could invest more,” equity prices are sending boardrooms a different sign, Wirth said. “There are two signals I’m looking for and I’m only seeing one of them” right now, he said. “We could afford to invest more. The equity market is not sending a signal that says they think we ought to be doing that.’” (Bloomberg, 9/15/2021)

Chevron’s CEO crowed the company has a “record financial performance” in 2022

Chevron’s CEO boasted that “ Chevron had an outstanding year in 2022, delivering record financial performance, producing more traditional energy.” “Mike Wirth — Chairman and Chief Executive Officer: Thank you, Roderick, and thanks, everyone, for joining us today. Chevron had an outstanding year in 2022, delivering record financial performance, producing more traditional energy, and advancing lower carbon businesses. Free cash flow stood a record, beating our previous high in 2021 by more than $15 billion, enabling a strong dividend increase and a buyback of almost 4% of our shares.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron reported its highest cash flow since 2011. “Pierre Breber — Chief Financial Officer: Record operating cash flows in combination with continued capital efficiency, resulting in over $37 billion of free cash flow in 2022. The only other year Chevron’s operating cash flow exceeded $40 billion was 2011. Free cash flow in that year was less than 40% and of this year’s record.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron’s earnings increased over $20 billion from 2021, crediting higher prices and refining margins. “Pierre Breber — Chief Financial Officer: For the full year, adjusted earnings increased more than $20 billion compared to the prior year. Adjusted upstream earnings were up primarily due to increased realizations. Other items include higher exploration expenses, higher incremental royalties, and production taxes due to higher prices, partially offset by favorable tax benefits and other items. Downstream adjusted earnings increased primarily due to higher refining margins, partially offset by lower chemical earnings and higher maintenance and turnaround costs.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron used their huge profits to spend $15 billion on stock buybacks and announced to spend $75 billion more

Chevron told analysts it maintained an annual stock buyback rate of $15 billion and announced a new $75 billion buyback program.“Pierre Breber — Chief Financial Officer: In 2022, Chevron delivered outstanding results on all four of its financial priorities, announcing earlier this week another 6% increase in our dividend per share, positioning 2023 to be the 36th consecutive year with annual dividend payout increases, investing within its organic budget despite cost inflation. Inorganic CaPex totaled $1.3 billion, nearly 80% for new energy investments, paying down debt in every quarter and ending the year with a 3% net debt ratio, returning record annual cash to shareholders through buybacks and exiting the year with an annual repurchase rate of $15 billion. Two days ago, Chevron’s board of directors authorized a new $75 billion share repurchase program. Now is a good time to look back on our execution of the prior programs.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron predicted spending as much as $15 billion in stock buybacks in 2023 compared to $14 billion for capital expenditures in 2023. “Pierre Breber — Chief Financial Officer: So, Mike has talked about our financial priorities. They’re simple. We’ve been consistent with them for a very long time. And three of the four are pegged. We just increased our dividend by 6%. We have a 2023 CaPex budget of $14 billion. We’ve given guidance that keeps that CaPex flat over the next several years. And we have the buybacks at the top end of the guidance range of $15 billion. So, swings in cash flow in the short term will go to the balance sheet. And that’s because commodity prices and margins, we just were talking about natural gas prices and refining margins, and things are moving up and down. But over the long term, those cash flows will be returned to shareholders.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron’s CEO: “we’re now at an all-time high with the rate of repurchases.” “Mike Wirth — Chairman and Chief Executive Officer: And so, you know, we increased the rate three times last year as we saw the situation evolve, and we’re now at an all-time high with the rate of repurchases. So, you know, the last thing, you said it, but I’ll repeat it, in size, you know, to maintain our program through the commodity cycle. We aren’t pro-cyclical. We’re not counter-cyclical.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron’s CEO emphasized growing oil production was not a priority compared to growing profits 

Chevron’s CEO: “we are growing production, but what we’re really focused on is growing returns and cash flow.” “Mike Wirth — Chairman and Chief Executive Officer: We’re growing well better than the overall demand for oil or for gas, which is growing faster than oil is. And so, we are growing production, but what we’re really focused on is growing returns and cash flow. And if we can grow returns and cash flow, the equation works. And so, you know, I — we’ll be happy to talk about this more when we’re together at the end of the month, but — or at the end of next month. But, you know, we can grow cash flow. We can improve returns at the rate that we’re spending. And so, I don’t know why, you know, there would be a question about our ability to do that. And the production numbers and outcome of those decisions, it’s not the goal.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron’s CEO: “we remain focused on returns and value, not on production.” “Mike Wirth — Chairman and Chief Executive Officer: And, Roger, just to emphasize the point I made earlier to another one of the questions, we remain focused on returns and value, not on production. And so, you know, that is the — that’s what drives all of this. Thanks.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron predicted a flat to slight growth in production in 2023. “Pierre Breber — Chief Financial Officer: 2023 production is expected to be flat to up 3% at $80 Brent. After adjusting for lower prices and portfolio changes, primarily the sale of our Eagle Ford asset and the expiration of a contract in Thailand, we expect production to grow, led by the Permian and other shale and tight assets. We remain confident in exceeding our long-term production guidance. Looking ahead to 2023, I’ll call out a few items.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron appeared to suggest some of their contracts actually reduced production when oil prices rose

Chevron’s CFO noted that “Chevron’s share of production is lower under certain international contracts when actual prices are higher than assumed in our guidance.” “Pierre Breber — Chief Financial Officer: 2022 production was in line with guidance after adjusting for higher prices. As a reminder, Chevron’s share of production is lower under certain international contracts when actual prices are higher than assumed in our guidance. The reserves replacement ratio was nearly 100%, with the largest net additions in the Permian, Israel, Canada, and the Gulf of Mexico. Higher prices lowered our share of proved reserves by over 100 million barrels of oil equivalent.” (Chevron Q4 2022 Earnings Call, 1/27/2023)

Chevron’s CEO specified, “the largest net reduction this year was in Kazakhstan due to the contract terms and the effect of higher prices.” “Mike Wirth — Chairman and Chief Executive Officer: This year, we had some additions in the Permian and Israel and Canada and the Gulf of Mexico, as Pierre mentioned. You know, the largest net reduction this year was in Kazakhstan due to the contract terms and the effect of higher prices. If you were to actually adjust that out, so we mentioned 100 million barrels where the price effect, you know, this year would be, you know, think of it as 107% ex the price effect. And so, I do think over time, you know, we intend to be in this business for quite a while, and 100% is a number that you ought to expect to see that or greater over time.” (Chevron Q4 2022 Earnings Call, 1/27/2023)