In the third quarter, the company's top line grew 49% year-over-year (y-o-y) to $66.6 billion. The company's net income jumped to $11.2 billion, or $5.78/share, from $6.1 billion, or $3.19/share, in the year-earlier quarter. It should be noted that profit slipped 3% from its all-time high in Q2 due to more than $600 million in net charges during the third quarter. In addition, Chevron's Q3 worldwide net production totaled 3 million barrels per day, with output in the International segment declining 3% y-o-y due to the end of concessions in Thailand and Indonesia. Its U.S. production increased by 4% y-o-y, mainly in the Gulf of Mexico and the Permian Basin. Also, the company's Q3 average sales price for crude oil and natural gas liquids in U.S. upstream operations was $76 per barrel, up from $58 per barrel in the year-earlier quarter, and the average sales price of natural gas surged to $7.05 per Mcf from $3.25 per Mcf (thousand cubic feet) a year ago.
Note: Chevron's FY'21 ended on December 31, 2021. Q3 FY'22 refers to the quarter that ended on September 30, 2022.
Below are key drivers of Chevron's value that present opportunities for an upside or downside to the current Trefis price estimate for Chevron:
Chevron Corporation is the second-largest energy company in the U.S., after Exxon Mobil. The company manages its investments in subsidiaries and affiliates and provides administrative, financial, management, and technology support to the U.S. and international subsidiaries that engage in fully integrated petroleum, chemicals, and mining operations, as well as power generation and energy services.
Chevron has operations in 180 countries along with a strong network of retail gas stations under the Chevron, Texaco, and Caltex brands. The company is also involved in pursuing alternative energy solutions.
Crude Oil and Natural Gas Liquids production is by far the most valuable segment for Chevron for the following reasons:
Although the revenues attributed to crude oil and NGL production are less when compared to downstream businesses like refined product sales, the profitability is much higher.
In 2021, the company's average selling price for crude oil was around $68 per barrel while average production costs were around $10 per barrel. The EBITDA margins for crude oil and NGL production are usually higher than the EBITDA margin for refined product sales due to the fact that the cost of production per barrel is quite low for crude oil compared to its selling price.
It is estimated that a large part of the world's oil reserves has already been discovered. Recent statistics have indicated that global consumption has been outpacing reserve additions. Peak oil is a commonly used term to describe the point at which world oil output will reach a maximum and decline afterward.
However, many institutions such as the International Energy Agency (IEA) believe that peak oil will not occur for another 25 years at the very least. Many governments across the world are promoting alternative energy measures to ensure that the supply and demand of energy will be met at all times to come.
Due to limited underlying growth in product demand, there has been a movement in recent years towards increasing the complexity of refineries rather than expanding capacity. In the U.S., no new refineries have been built since 1980, however, improvements in process design and technology have seen capacity increase by around 1% per year.
The early refineries that were established were mainly used to process light sweet crude resulting in an increase in demand for light sweet crude. As a result of higher oil prices in recent times, heavy crude oil is becoming more economically attractive. In addition, interest in the development of new cost-effective methods for extracting and transporting heavy crude oil, for refining into valuable light and middle distillate fuels, is also increasing.
The shares of Chevron Corporation have touched the highs of $174 assisted by skyrocketing benchmark oil & gas prices and rising transportation demand. In 2021, the company reported 1.8 MMBPD of liquid production which is almost 2% of the global crude oil output. While the geopolitical uncertainty due to the Russia-Ukraine war is leading to spikes in benchmark oil prices, rising inflation is jeopardizing global economic growth and triggering measures such as new energy security alliances.
