10-Q: Chevron's Q1 2025 Earnings Dip Amid Lower Prices, TCO Impact, Hess Acquisition Progresses

Chevron's first quarter 2025 earnings decreased compared to the previous year, primarily due to lower crude oil and refined product prices, decreased earnings from equity affiliates, and the ongoing acquisition of Hess Corporation.

Summary

• Chevron's net income attributable to Chevron Corporation for Q1 2025 was $3.5 billion, or $2.00 per diluted share, compared to $5.5 billion, or $2.97 per diluted share, in Q1 2024.
• Upstream earnings decreased to $3.8 billion from $5.2 billion year-over-year, due to lower liftings, lower affiliate earnings at TCO, lower realizations, and unfavorable swings in tax items and foreign exchange effects.
• Downstream earnings decreased to $325 million from $783 million year-over-year, primarily due to lower margins on refined product sales and a legal reserve.
• The company's worldwide net oil-equivalent production averaged 3.35 million barrels per day, relatively flat compared to the previous year.
• Capital expenditures totaled $3.9 billion, a slight decrease from the $4.1 billion spent in the same period last year.
• The company repurchased 25.0 million shares for $3.9 billion in Q1 2025 and expects to repurchase between $2.5-$3.0 billion in the second quarter.
• Chevron's total debt and finance lease liabilities were $29.7 billion at the end of the quarter, up from $24.5 billion at the end of 2024.
• The company is progressing with the acquisition of Hess Corporation, with a majority of Hess stockholders approving the merger, but the transaction is facing delays due to arbitration proceedings regarding preemptive rights in the Stabroek Block joint operating agreement.
• Chevron has announced plans to achieve $2-3 billion in structural cost reductions by the end of 2026.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While earnings are down, the company is taking steps to address the challenges and is progressing with strategic initiatives like the Hess acquisition and cost reduction programs. There are also legal and political risks.

Positives

• Chevron's worldwide net oil-equivalent production remained relatively flat at 3.35 million barrels per day.
• The company continues to execute its share repurchase program, buying back $3.9 billion worth of shares in Q1 2025.
• The company is progressing with the acquisition of Hess Corporation, with a majority of Hess stockholders approving the merger.
• The Wellhead Pressure Management Project (WPMP) at Tengizchevroil LLP (TCO) was fully operational at year-end 2024.
• In January 2025, TCO started oil production at its Future Growth Project (FGP) and by the end of first quarter, FGP had ramped up to its nameplate capacity.

Negatives

• Net income attributable to Chevron Corporation decreased to $3.5 billion in Q1 2025 from $5.5 billion in Q1 2024.
• Upstream earnings decreased due to lower liftings, lower affiliate earnings at TCO, lower realizations, and unfavorable swings in tax items and foreign exchange effects.
• Downstream earnings decreased due to lower margins on refined product sales and a legal reserve.
• The Hess Corporation acquisition is facing delays due to arbitration proceedings regarding preemptive rights in the Stabroek Block joint operating agreement.
• Chevron is winding down its activities in Venezuela in accordance with revised authorities provided by the U.S. government and resulting direction from the Venezuela government.
• A jury in a Louisiana state court awarded Plaquemines Parish $744.6 million in a trial against Chevron entities.

Risks

• The price of crude oil, natural gas, and NGLs are subject to external factors outside of the company's control.
• International initiatives and national, regional and state legislation and regulations that aim to directly or indirectly reduce GHG emissions are in various stages of design, adoption and implementation.
• The Hess Corporation acquisition may not be completed or may be delayed due to regulatory hurdles and arbitration proceedings.
• An adverse event or incident affecting Caspian Pipeline Consortium (CPC) operations could negatively impact Tengiz field production.
• The ongoing conflict between Israel and various regional adversaries could impact the company's operations in the region.
• The wind-down of activities in Venezuela will have a negative impact on the company's future results of operations.
• The company is subject to loss contingencies pursuant to laws, regulations, private claims and legal proceedings related to environmental matters.

Future Outlook

Chevron aims to grow its oil and gas business, lower the carbon intensity of its operations and grow new businesses in renewable fuels, carbon capture and offsets, hydrogen, power generation for data centers, and emerging technologies. The company is targeting $10-15 billion of asset sales over the five-year period ending in 2028. Chevron expects share repurchases in the second quarter 2025 to be between $2.5-$3.0 billion.

Management Comments

• The company's objective is to safely deliver higher returns, lower carbon and superior shareholder value in any business environment.
• Chevron supports the Paris Agreements global approach to governments addressing climate change and continues to take actions to help lower the carbon intensity of its operations while continuing to meet the demand for energy.
• Chevron believes that broad, market-based mechanisms are the most efficient approach to addressing GHG emissions reductions.

Industry Context

The report reflects the broader industry trends of fluctuating commodity prices, increasing focus on carbon emissions reduction, and strategic acquisitions to enhance long-term value. The company's performance is influenced by global economic conditions, geopolitical events, and regulatory changes affecting the energy sector.

Comparison to Industry Standards

• Chevron's performance is comparable to other major integrated oil and gas companies such as ExxonMobil, Shell, and BP, which also face similar challenges related to commodity price volatility and the energy transition.
• The company's focus on cost reduction and asset sales aligns with industry efforts to improve capital efficiency and shareholder returns.
• The acquisition of Hess Corporation is a significant strategic move, similar to other large-scale mergers and acquisitions in the energy sector aimed at consolidating resources and expanding market presence.
• Chevron's commitment to reducing carbon emissions and investing in renewable energy is in line with industry trends towards sustainability and environmental responsibility.

Legal Proceedings

• Chevron entities are defendants in 37 cases related to coastal erosion in Louisiana, with a jury awarding Plaquemines Parish $744.6 million in one trial.
• Chevron entities are or were among the codefendants in 33 separate lawsuits filed by various U.S. cities and counties, five U.S. states, the District of Columbia, the Commonwealth of Puerto Rico, two Native American tribes, and a trade group in both federal and state courts regarding climate change.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings and the potential delay in the Hess acquisition.
• Employees may be affected by the announced plans to achieve $2-3 billion in structural cost reductions by the end of 2026.
• Customers will continue to be served with oil and gas products, while the company also invests in lower-carbon energy sources.
• Suppliers and vendors may be impacted by the company's efforts to manage costs and supply chain activities.
• Communities in Louisiana may be affected by the outcome of the coastal erosion lawsuits.

Next Steps

• Chevron and Hess are working to complete the merger as soon as practicable.
• Chevron expects share repurchases in the second quarter 2025 to be between $2.5-$3.0 billion.
• The company will continue to develop oil and gas resources to meet customers and consumers demand for energy.
• Chevron will continue to maintain flexibility in its portfolio to be responsive to changes in policy, technology, and customer and consumer preferences.
• Chevron will continue to evaluate the impact of legislative adoption by individual countries regarding the OECD's Pillar Two framework.

Key Dates

Keywords

Chevron, earnings, Hess Corporation, upstream, downstream, production, capital expenditures, share repurchase, Tengizchevroil, oil prices, natural gas, Venezuela, climate change, legal proceedings