Chevron Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 was a year of execution with record production, completed major projects (e.g., Tengiz Future Growth Project), and strengthened the portfolio. Closed the Hess acquisition to create a premier upstream portfolio.
• Downstream operations saw highest US refinery throughput in two decades due to expansion and efficiency.
• In Venezuela, production grew over 200,000 bpd since 2022 under US laws, with potential to grow 50% in 18-24 months. Reliably delivering Venezuelan crude to the market.
• In the Eastern Mediterranean, advanced high-return projects: Leviathan reached FID, Tamar optimization in progress, and Aphrodite entered FEED.
• TCO experienced a power distribution issue, but early production resumed, with full capacity expected within the coming week.

Segment Performance

• Upstream: Production reached record levels globally, with key milestones like completion of Tengiz Future Growth Project (260,000 bpd), start-up of Valleymore, Whale, and ramp-up of Anchor in the Gulf of America. Permian achieved 1,000,000 barrels of oil equivalent per day. Closing the Hess acquisition created a premier upstream portfolio. Adjusted upstream earnings decreased due to lowered liquids prices.
• Downstream: Delivered highest US refinery throughput in two decades due to recent expansion projects and higher efficiency. Adjusted downstream earnings were lower largely due to lower Chemicals earnings and Refining volumes.
• Financials: Fourth-quarter earnings were $2,800,000,000 ($1.39 per share), adjusted earnings were $3,000,000,000 ($1.52 per share). Cash flow from operations was $10,800,000,000 for the quarter. Organic CapEx was $5,100,000,000 for the quarter. Repurchased shares at $3,000,000,000. Balance sheet remained strong with a net debt coverage ratio of 1x.

Guidance

• 2026 free cash flow from TCO at $70 Brent is unchanged at $6,000,000,000.
• Expect continued cash flow growth driven by low-risk production growth, ongoing cost savings, and capital discipline.
• Anticipate 7%-10% production growth in 2026 excluding asset sales, with benefits from project ramp-ups, full year of Hess assets, and efficiency in the Shield portfolio.
• Structural cost reduction program delivered $1,500,000,000 in 2025, with a run rate over $2,000,000,000, targeting $3,000,000,000 to $4,000,000,000 by 2026.

Risks

• TCO experienced a temporary power distribution system issue initially impacting production.
• Loading berth issues at CPC due to military activity in the Black Sea affected operations.
• Geopolitical and regulatory uncertainties in Venezuela and other regions pose challenges to investment and production.

Question and Answer Q: Elaborate on TCO volumes in 2026.

A: The power issue at TCO was resolved, production was safely put in recycle mode. Maintenance schedule is optimized, and debottlenecking efforts are underway to increase productive capacity.

Q: Unpack Venezuela assets and their potential.

A: Chevron has been in Venezuela over a century. Production grew over 200,000 bpd since 2022, with potential to grow 50% in 18-24 months, funded by cash within ventures.

Q: Discuss Tengiz and Kazakhstan compensation cuts.

A: Unclear on specifics of compensation cuts in Kazakhstan, but TCO barrel historically less impacted by production restrictions in the country.

Q: Walk through progress in the Eastern Mediterranean.

A: Excited about resource potential in the Eastern Mediterranean, with Leviathan expansion, Aphrodite in FEED, and exploration in Egypt underway.

Q: Early results of the cost reduction program.

A: Saved $1,500,000,000 in 2025, run rate over $2,000,000,000, with organizational efficiencies driving results and targeting $3-4B by 2026.

Q: Permian strategy and performance.

A: Holding Permian at 1,000,000 barrels of oil per day, capital efficiency improving, decision-making focused on cash flow growth rather than just production growth.

Q: OPEC countries Libya, Iraq, and LNG portfolio.

A: Engaged in discussions in Libya and Iraq, LNG projects need competitive returns; Chevron is selective and seeks highest returns.

Q: Refining tailwinds from Venezuela and California.

A: Bringing more Venezuelan crude into refining systems, California refinery strength due to capacity closures in the state.

Q: Reserve replacement ratio.

A: Triple R led peer group, blend of organic and inorganic growth, with strong five and ten-year trends.

Q: Chemical surfactants in other basins.

A: Testing in Bakken and DJ, early results encouraging, with plans to scale and share further results.

Q: Bakken performance and strategy.

A: Applying best practices from other portfolios, optimizing development, aiming for 200,000 barrels per day+ with focus on cash flow.

Q: Margin improvement in US upstream.

A: Due to new production in the Gulf of America, efficiency in Permian/DJ/Bakken, and structural cost savings.

Q: Venezuela heavy crude absorption.

A: Markets will redistribute, impacting light-heavy spreads, but detailed modeling needed to assess exact impact.

Q: M&A funding and balance sheet metrics.

A: Flexible on M&A funding, balance sheet in good shape; changed to debt to cash flow metric to align with rating agencies' focus