Chevron Revenue Increases from PDC Energy, Raises Dividend 8%

Chevron, the second-largest U.S. oil company after Exxon, on Friday reported stronger-than-expected third quarter earnings. CVX posted total adjusted earnings of $2.3 billion, or $3.45 a share beating analysts looking for a profit of $3.19 a share. Chevron announced record annual production, enabled by the acquisition of Colorado producer PDC Energy and raised the quarterly dividend by 8% to $1.63 a share bringing the company’s dividend yield to 4.3%, ahead of Exxon’s 3.7%. Chevron spent a record $26 billion on buybacks and dividends in 2023.

Chevron, like Exxon has been busy with takeovers. Last year they also announced a $53 billion deal to buy Hess (HES) that will give it a stake in the hot Guyana offshore oil-drilling project.

Chevron Gas Station
Chevron is the US’s second biggest oil company after Exxon

Chevron Inc. (NYSE: $CVX) Reported Earnings Before Open Friday

Chevron Corporation Q4 23 Earnings

Highlights

  • Fourth-quarter profit of $2.24 billion in the last three months of 2023, which was down from nearly $6.4 billion in fourth-quarter 2022 due to lower average selling prices and higher depreciation and tax costs.
  • Adj EPS: $3.45 (est $3.22)
  • Revenue: $47.18B (est $51.20B)
  • Worldwide Production 3,392 MBOE/D
  • Raises Quarterly Dividend 7.9% To 1.63/Share
  • Chevron’s worldwide production was nearly 3.4 million boe/d versus nearly 3.15 million boe/d in third-quarter 2023, the first quarter with PDC Energy Inc. in.
  • Production is forecast to grow 4-7% this year.
  • Kazakhstan production was its highest in four years.
  • Expects to hit its goal of pumping the equivalent of 1 million barrels a day of oil a day in the Permian Basin by 2025, up from 867,000 in the fourth quarter.

“We’re confident we’re going to close the Hess transaction,” CFO Pierre Breber said in an interview with Barron’s. “We expect it to close around the middle of the year. We’re right now in the process of working to respond to the FTC’s second request. It’s very broad. We don’t think there are competitive concerns, but we’re gonna go through that process.”

CVX Stock Market Reaction

  • $152.23 ▲ +4.34 (+2.93%) February 2 · Market Close
  • $152.23 ▼ -17.22 (-10.16%) past year
  • $152.23 ▲ +33.86 (+28.61%) past 5 years
  • 52wk High $174.39
  • 52wk Low $139.62

Cash Flows, Capital Expenditure

  • Capex in 2023 was up 32 percent from last year primarily due to higher investments in the United States, including about $450 million invested in PDC assets post-acquisition and approximately $650 million of inorganic spend, mainly due to the acquisition of a majority stake in ACES Delta, LLC. Capex excludes the acquisition cost of PDC.
  • Cash flow from operations was lower than a year ago mainly due to lower commodity prices
    and lower margins on refined product sales. Over the past three years, the company has
    generated over $110 billion in cash flow from operations and nearly $80 billion of free cash
    flow.
  • Eliminated over $4 billion of debt, including all debt assumed in the PDC acquisition,
    resulting in a net debt ratio of 7.3 percent.
  • The company returned a record $26.3 billion of cash to shareholders during 2023, including
    dividends of $11.3 billion (3 percent higher than 2022) and share repurchases of $14.9
    billion (32 percent higher than last year).
  • The company’s Board of Directors declared an 8 percent increase in the quarterly dividend
    to one dollar and sixty-three cents ($1.63) per share, payable March 11, 2024, to all holders
    of common stock as shown on the transfer records of the corporation at the close of
    business on February 16, 2024

Outlook

Chevron said it is targeting 10% growth in the Permian this year, which would set it on pace to pump 1Mbblpd from the region in 2025; “Our growth is higher likely than the basin average but it is representative of our activity level and the activity level of our partners,” CFO Pierre Breber told Bloomberg.


Chevron Aggressive Acquisition Hunt.

2023 Business Highlights

  • Completed the acquisition of PDC, enhancing the company’s strong presence in the DJ and
    Permian Basins in the United States.
  • Completed the acquisition of a majority stake in ACES Delta, LLC, which is developing a
    green hydrogen production and storage hub in Utah.
  • Achieved first oil at the Mad Dog 2 project in the Gulf of Mexico.
  • Achieved first natural gas production from the Gorgon Stage 2 development in Australia.
  • Achieved mechanical completion on the Future Growth Project at the company’s 50 percent-
    owned affiliate, Tengizchevroil.
  • Converted the diesel hydrotreater at the El Segundo, California refinery to process either
    100 percent renewable or traditional feedstocks.
  • Reached final investment decision to construct a third gathering pipeline that is expected to
    increase natural gas production capacity at the Leviathan reservoir, offshore Israel.
  • Expanded the Bayou Bend carbon capture and sequestration hub on the U.S. Gulf Coast
    through an acquisition of nearly 100,000 acres.
  • Received approvals to extend Block 0 concession in Angola through 2050.
  • Received approval to extend licenses with PetroBoscan, S.A. and PetroIndependiente, S.A.
    in Venezuela through 2041.
  • Acquired 73 exploration blocks in the Gulf of Mexico (GOM) lease sale 259 and submitted
    winning bids on 28 blocks in GOM lease sale 261, subject to final government approval.
  • Announced a definitive agreement to acquire Hess Corporation, which is expected to
    strengthen Chevron’s long-term performance by adding world-class assets and people

Chevron To Buy Hess for $53 billion

“By one oil-industry metric, known as cost-per-flowing-barrel, Chevron is paying a much higher price for Hess, but doing so will secure the California-based driller a 30% stake in Guyana’s Stabroek Block, one of the world’s largest crude discoveries in years.” – Bloomberg

Chevron entered into a definitive agreement to buy Hess Corporation (HESS) for $53 billion in an all-stock deal. Chevron will pay $171 per share for Hess, a premium of about 10% to the 20-day average price. Hess shareholders will receive 1.025 shares of Chevron for each Hess share, giving the company a total enterprise value of $60 billion, including debt. The acquisition gives Chevron a significant foothold in Guyana, where it’s competitor Exxon is a major producer and CVX says will enable faster production growth.

Agreement to buy PDC Energy. 

Announced an agreement to acquire PDC Energy, Inc. in an all-stock transaction, with closing anticipated in August 2023. This acquisition is expected to add $1 billion to annual free cash flow.

Noble Acquisition

The company’s $13bn acquisition of Noble, the first big move in a wave of mergers that swept through the battered US oil sector last year. closed in the fourth quarter of 2020. For 2018 through 2020, the company generated asset sales proceeds of $7.7 billion, in the middle of its guidance range of $5-$10 billion.

About Chevron

Chevron Corp. is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. It has large exposure to the Permian and to LNG with the  Wheatstone Chevron LNG Facility production starting in Western Australia

The Permian Basin remains a key source of capital flexibility, and it is a key issue behind many analysts preference for Chevron versus some of the other majors. Chevron’s liquids-rich upstream segment is likely to benefit from higher crude price realizations. This segment is expected to record higher production volumes on the back of major capital projects including Gorgon, and core developments in the Gulf of Mexico and Permian Basin.

Sources: TradersCommunity, CVX, AlphaStreet

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