A Deep Look Into Chevron’s Operations & Future Growth

Chevron Corporation is a leading energy company that produces and sells oil and gas. With operations spanning over 180 countries,

Chevron primarily manufactures and sells fuels, lubricants, additives, and petrochemicals. As the second-largest oil company in the USA by revenue, Chevron employs approximately 45,600 people.

The company is known for its renowned brands, including Chevron, Texaco, Caltex, Havoline, and Techron.

Chevron’s Revenue Model

Chevron Corporation’s revenue primarily comes from several key segments within its operations. Here’s a detailed breakdown of each product category and its contribution to the company’s total revenue:

1. Crude Oil and Natural Gas Liquids (NGLs):

– 60% of Total Revenue

   – Chevron’s primary revenue driver is the exploration, production, and sale of crude oil and natural gas liquids. This segment encompasses activities related to extracting oil and NGLs from various global reserves.

2. Natural Gas:

 – 15% of Total Revenue

   – Another significant portion of Chevron’s revenue comes from the exploration, production, and sale of natural gas. This includes both domestic and international operations.

3. Refined Petroleum Products:

– 18% of Total Revenue

   – Chevron produces and sells a range of refined petroleum products, including gasoline, diesel, and jet fuel. These products are distributed through Chevron’s extensive network of service stations and to other commercial customers.

4.  Lubricants, Additives, and Petrochemicals:

– 7% of Total Revenue

   – The company also manufactures and sells lubricants, additives, and petrochemicals. These products are marketed under well-known brands such as Havoline, Techron, and others, catering to automotive, industrial, and commercial applications.

Revenue and Gross Profit

– Total Revenue: $196.9 billion

– Gross Profit: $60.4 billion

–Gross Profit Margin: 30.5%

Chevron’s FY 2023 revenue totaled $196.9 billion, with a gross profit of $60.4 billion, resulting in a gross profit margin of 30.5%.

Revenue Trends Over Four Years

– 2020: $94.4 billion (Impacted by COVID-19 lockdowns)

– 2021: $155.6 billion

– 2022: $235.7 billion (Exponential Growth)

– 2023: $196.9 billion

Chevron’s revenue trends show significant variability over the past four years: $94.4 billion in 2020, heavily impacted by global COVID-19 lockdowns; $155.6 billion in 2021; a peak of $235.7 billion in 2022; and $196.9 billion in 2023.

Net Profit

– Net Profit: $20.3 billion

– Net Profit Margin 10.3%

Chevron recorded a net profit of $20.3 billion for FY 2023, resulting in a net profit margin of 10.3%. This margin indicates around 10% of Chevron’s revenue translates into net profit after expenses and taxes.

Industry Challenges

– Capital Expenditure: Significant for production, distribution, and sales

– Profitability Concerns: Industry norms include lower net profit margins, posing challenges during crises like COVID-19 (e.g., net loss in 2020)

The oil and gas industry, including Chevron, requires substantial capital expenditure for operations. Despite high revenue, lower net profit margins are typical due to operational costs and market volatility. The COVID-19 pandemic exemplified these challenges, leading to a net loss for Chevron in 2020.

Financial Position of Chevron Corporation (as of December 31, 2023)

Total Assets and Liabilities

• Total Assets: $261.6 billion
• Total Debt: $99.7 billion
• Shareholders’ Equity: $160.9 billion

Debt to Equity Ratio

• Debt to Equity Ratio: 62%

This ratio indicates that Chevron’s total debt is 62% of its shareholders’ equity. Another perspective is that using 62% of the equity value, Chevron could pay off all its debts and still have 38% of equity value remaining for shareholders.

Financial Metrics of Chevron Corporation (as of Current Date)

Stock Information

• Stock Symbol: CVX
• Stock Price: $156 per share

Earnings and Valuation

• Earnings Per Share (EPS): $10.87
• Price-Earnings (P/E) Ratio: 14.39
  • A P/E ratio of 14.39 implies it would take approximately 14 years to cover the initial investment if earnings remain constant.

Dividend Information

• Dividend Per Share: $6.52
• Dividend Yield: 4.17%
  • A dividend yield of 4.17% indicates that investors receive 4.17% of the stock’s current price as dividends annually.

Dividend Policy

• Dividend Payout Ratio: 60%
  • Chevron pays out 60% of its earnings as dividends, retaining 40% for future growth.
  • This balanced approach maintains a healthy dividend yield while supporting future investment and growth initiatives.

Investment Considerations

• Chevron offers a stable dividend yield of 4.17%, making it an attractive option for investors seeking consistent dividend income.
• Inflationary environments often favor investments with stable dividend returns, enhancing Chevron’s appeal to income-focused investors.