About the Company

Chevron Corporation is the world's third largest energy company by market capitalization,[1] with a history dating back to 1879, when it was founded as the Pacific Coast Oil Company. Today, the company is headquartered in San Ramon, California, and operates in more than 180 countries. Chevron engages in a wide range of activities in the energy sector, including oil and gas research and production, refining, petroleum product manufacturing and distribution, and chemical product development. In recent years, it has actively invested in the development of renewable energy and technologies to reduce greenhouse gas emissions, reflecting its commitment to sustainability and environmental responsibility. Chevron is also a key player in the global energy trade, and its financial performance regularly ranks it among the largest publicly traded corporations in the world. Despite facing challenges in the form of volatile oil prices and increasing pressure to decarbonize, Chevron remains a leader in both traditional and alternative energy solutions, and plays an important role in ensuring global energy security.

A major technological breakthrough in oil production

Chevron has recently had a significant success in deepwater oil exploration, which means the ability to reach previously inaccessible places on the ocean floor. That's because the new technology was able to withstand 20,000 PSI of pressure, which is nearly 138 megapascals. This technological breakthrough is part of the $5.7 billion Anchor project, which Chevron is undertaking in partnership with TotalEnergies. Located in the Gulf of Mexico, the project has an expected life of 30 years and could produce up to 75,000 barrels of oil and approximately 793,000 cubic metres of natural gas per day at its peak. Technological progress is also being made by other companies in the industry. British oil giant BP, for example, discovered a new deepwater oil field in the Gulf of Mexico back in 2006, but the tools at the time did not allow working at such high pressure. Although construction of the project has already been approved, the platform will not start producing oil until 2029.[2]

Revenues have been marred by unfavourable exchange rates

In the second quarter of 2024, Chevron reported revenue of just under $50 billion, which was above consensus estimates of $48.7 billion. Net income was $4.4 billion, down 26.2% from $6 billion in the same period last year. However, diluted earnings per share of $2.55 failed to beat analysts' expectations, which were $0.39 higher. According to the company, unfavorable currency effects resulted in a $243 million decline in revenue. Despite the decrease in net profit, the company increased its global production by 11%, thanks to the acquisition of PDC Energy and successful development of new wells. At the same time, Chevron returned $6 billion to shareholders through dividends and share buybacks.[3][4][5]

Chevron Corporation's share price performance over the past 5 years. (Source: Google Finance)*

U.S. drills are streamlining their production onshore as well

The latest data from the Permian Basin, the area with the largest deposits of so-called shale oil in the US, shows that companies here are increasing the efficiency of their operations because they can produce more oil for the same cost. That's why Chevron has raised its forecast for full-year production growth to 15% from 10% a year earlier, while many other companies operating in the area are doing similarly. In addition, Chevron says it is one of the first companies to use so-called triple fracking technology, which can reduce the time of the entire extraction process by 25% and save project costs. Increased production efficiency may mean a surplus in U.S. crude oil reserves this year, as some estimates suggest production will increase by 500,000 barrels per day, surpassing even the U.S. government's estimate of 300,000 barrels by the end of the year.[1]

Modernization of the project in Kazakhstan

Tengiz oil field modernization in Kazakhstan, in which Chevron is investing $47 billion, is expected to increase the field's daily production to 1 million barrels per day. Tengizchevroil, which manages the field, is a project of Chevron, ExxonMobil, KazMunayGas and LukArco, with Chevron holding a 50% stake. If the projected production is achieved, Chevron can expect an increase in revenues from oil sales, which is particularly important in the current environment where oil prices are volatile.[1] The energy giant will have to negotiate an extension to its existing production sharing contract, which expires in 2033. If the terms of the extension cannot be agreed in time, this could affect long-term planning and investment. The extension must be beneficial to both parties – Chevron and the Kazakh government – which may be challenging if there are disagreements over terms.[2]

Conclusion

Chevron Corporation continues to successfully operate as a global leader in the power sector, despite the challenges associated with oil price volatility and pressure to decarbonize. The company is making significant technological advances that are opening up new opportunities in resource extraction. Investments in modernisation, more efficient production and the development of renewable energy demonstrate its commitment to innovation and sustainability. This positions Chevron as a key player not only in the traditional power sector, but also in emerging sectors, helping to ensure global energy stability.

Adam Austera, Principal Analyst at Ozios

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.investing.com/news/commodities-news/us-shale-companies-produce-more-crude-using-fewer-rigs-3568390

[2] https://www.upstreamonline.com/field-development/chevron-sees-strong-progress-at-tengiz-field-upgrade-in-kazakhstan-but-long-term-project-lead-uncertain/2-1-1687789

[1] https://companiesmarketcap.com/energy/largest-companies-by-market-cap/

[2] https://www.investing.com/news/commodities-news/chevron-delivers-industry-first-in-ultrahigh-pressure-oil-field-3566623

[3] https://chevroncorp.gcs-web.com/static-files/035f56c4-2f35-4b39-9117-77cb2eb6100d

[4] https://www.investing.com/news/stock-market-news/chevron-earnings-missed-by-039-revenue-topped-estimates-3551836

[5] https://www.google.com/finance/quote/CVX:NYSE?window=5Y