Exchange: NYSE | Sector: Energy | Industry: Oil Gas Integrated
Q4 2023
Published: Feb 26, 2024
Earnings Highlights
Revenue of $48.93B down 10.3% year-over-year
EPS of $1.21 decreased by 63.7% from previous year
Gross margin of 29.0%
Net income of 2.26B
"Chevron's clear and consistent approach resulted in an adjusted ROCE of 14% and enabled a record of $26 billion in cash return to shareholders." - Mike Wirth
Chevron Corporation reported a solid financial performance in Q4 2023. Revenue reached $48.93 billion, representing a quarter-on-quarter decline of 5.76% and a year-over-year decrease of 10.25%, primarily driven by lower crude prices. Despite this decline, Chevron's adjusted earnings improved to $6.5 billion, or $3.45 per share, reflecting an upward trend from the previous quarter's adjusted earnings of $5.77 billion, indicating strong operational efficiency despite market challenges. Management emphasized their commitment to capital discipline and return on capital employed (ROCE), which remained steady at 14%. Chevron is also on track with its asset integration strategy following the acquisition of PDC Energy and aims to finalize the Hess acquisition this year, positioning itself for continued long-term growth in a competitive landscape.
Gross Profit: $14.20 billion, with a gross profit margin decreasing to 29%.
Operating Income: $5.41 billion, representing a drop of 45.55% YoY.
Net Income: $2.26 billion, or EPS of $1.22, down 64.44% YoY.
**Profitability Metrics:**
EBITDA: $9.99 billion, and an EBITDA margin of 20.5%.
Financial Highlights
Revenue Performance:
- Q4 2023 Revenue: $48.93 billion (QoQ: -5.76%, YoY: -10.25%)
- Gross Profit: $14.20 billion, with a gross profit margin decreasing to 29%.
- Operating Income: $5.41 billion, representing a drop of 45.55% YoY.
- Net Income: $2.26 billion, or EPS of $1.22, down 64.44% YoY. Profitability Metrics:
- EBITDA: $9.99 billion, and an EBITDA margin of 20.5%.
- Net Income Margin: 4.7%. Balance Sheet Strength:
- Total Assets: $261.63 billion; Total Liabilities: $99.70 billion; Total Equity: $160.96 billion.
- Net Debt Ratio: 7%, reflecting strong debt management.
- Cash Flow from Operations: $12.43 billion, with a free cash flow of $8.07 billion after capital expenditures of $4.36 billion.
Management attributed the revenue decline to lower oil prices while maintaining a commitment to return cash to shareholders, announcing an 8% dividend increase, which highlights confidence in future cash flows.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
48.93B
-10.25%
-5.76%
Gross Profit
14.20B
-17.38%
-8.78%
Operating Income
5.41B
-45.55%
-20.31%
Net Income
2.26B
-64.44%
-65.38%
EPS
1.21
-63.66%
-65.33%
Key Financial Ratios
currentRatio
1.28
grossProfitMargin
9.9%
operatingProfitMargin
7.65%
netProfitMargin
4.79%
returnOnAssets
0.86%
returnOnEquity
1.4%
debtEquityRatio
0.14
operatingCashFlowPerShare
$6.68
freeCashFlowPerShare
$4.34
dividendPayoutRatio
124.3%
priceToBookRatio
1.73
priceEarningsRatio
30.73
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Insights from Management:
1. Market Positioning: Mike Wirth stated: "Chevron delivered another year of solid results in 2023... We also successfully integrated PDC Energy and announced the Hess acquisition, focusing on maintaining capital and cost discipline."
2. Production Insights: Wirth noted, "In the Permian, we delivered a record of 867,000 barrels of oil equivalent per day, while building our DUC inventory in the fourth quarter, which sets us up for a growth trajectory in 2024."
3. Strategic Direction: Wirth emphasized: "We expect production in the first half of the year to be down from the fourth quarter by about 2% to 4%, but expect significant growth as we move toward a million barrels per day in 2025."
Forward Guidance: Management anticipates 2024 production growth between 4%-7%, with capital expenditures projected around $5 billion for the year, indicating strategic allocations towards operational efficiencies.
Chevron's clear and consistent approach resulted in an adjusted ROCE of 14% and enabled a record of $26 billion in cash return to shareholders.
— Mike Wirth
We do not expect significant affiliate dividends in the first quarter. However, the difference between affiliate earnings and dividends is expected to decrease in the second half of the year after TCO’s startup of WPMP.
— Pierre Breber
Forward Guidance
Looking ahead, Chevron management highlights a targeted production growth of 4%-7% for 2024, underpinned by continued efficiency improvements and strategic execution in its core segments, notably the Permian Basin and DJ Basin. The company also forecasts an increased focus on reducing carbon intensity across operations, projecting significant advancements in carbon capture and hydrogen projects. Investors should monitor commodity price movements as they influence short-term performance, while the long-term growth strategy, bolstered by acquisitions in resilient and lucrative segments, remains a priority for Chevron.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CVX Focus
29.00%
7.65%
1.40%
30.73%
BP
19.80%
10.70%
0.53%
66.93%
SHEL
10.20%
4.78%
0.25%
114.48%
PBR
52.10%
37.10%
7.96%
4.14%
SU
42.70%
16.20%
6.52%
4.87%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investors should consider Chevron's strategic focus on capital discipline and returning cash to shareholders as advantageous in the current economic climate. Despite recent profit declines, the company's proactive measures, including the acquisition of Hess, and strong production capabilities in key geographies, such as the Permian Basin, indicate potential for revenue recovery and growth. With the anticipated increases in production and effective cost management strategies, the outlook remains cautiously optimistic, underscoring Chevron's resilient business model within the energy sector.
Key Investment Factors
Growth Potential
Chevron's investments in high-margin areas, including the Permian Basin, combined with strategic acquisitions like Hess, position the company for enhanced production capacity and revenue growth in the medium to long term.
Profitability Risk
Ongoing geopolitical instability and fluctuations in crude oil prices pose risks to revenue stability. Additionally, capital expenditure management will be critical as the company enhances production capabilities without overextending itself financially.
Financial Position
With a robust net debt ratio of 7%, Chevron's balance sheet reflects prudent financial management, enabling continued shareholder returns through dividends and buybacks, amid volatile market conditions.
SWOT Analysis
Strengths
Strong brand reputation and market positioning in a volatile sector
Diversified asset base spanning upstream and downstream operations
Commitment to returning cash to shareholders through dividends and buybacks
Operational efficiency leading to competitive ROCE
Weaknesses
High dependency on crude oil prices may affect revenue stability
Recent declines in quarterly earnings and margins impacting investor sentiment
Opportunities
Growth potential through strategic acquisitions and expansions in high-margin areas
Advancements in carbon capture technology and investments in renewable energy to enhance long-term sustainability
Threats
Volatility in oil prices due to global geopolitical events
Environmental regulations may impose additional costs and operational constraints