Chevron Earnings Call: Record Output, Cash and Cost Wins

Chevron ((CVX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Chevron’s Earnings Call Signals Confident Growth Despite Commodity and Cyclical Headwinds

Chevron’s latest earnings call carried an overall upbeat tone, underscoring record production, strong free cash flow growth, and disciplined capital allocation, even as lower oil prices and a cyclical downturn in chemicals weighed on quarterly earnings. Management emphasized that operational progress in core growth engines—including the Permian, Tengiz, Guyana, and the Eastern Mediterranean—combined with an accelerating cost-reduction program, is positioning the company for higher volumes, robust cash returns, and resilience through the cycle.

Record Production and a Deep Portfolio Underpin Growth

Chevron reported record global production for 2025, including the highest full-year U.S. output in the company’s history, highlighting the strength and breadth of its portfolio. A key milestone was the Permian Basin surpassing 1,000,000 barrels of oil equivalent per day (boe/d), underscoring the basin’s role as Chevron’s flagship growth engine. Offshore and international projects are adding further momentum: start-ups at Valleymore, Whale, and Anchor, together with Tengiz’s Future Growth Project, which is expected to add roughly 260,000 barrels per day, are central to Chevron’s push toward its medium-term volume targets.

Strong Free Cash Flow Fuels Record Cash Returns

Despite nearly a 15% year-over-year decline in oil prices, Chevron generated $20.0 billion in adjusted free cash flow for the year, with more than 35% growth when asset sales are excluded—evidence of improving capital efficiency and portfolio quality. The company delivered record cash returns to shareholders for the fourth consecutive year, including about $3.0 billion of share repurchases in the fourth quarter alone. Across 2025, total buybacks—when including discounted Hess shares and repurchases—exceeded $14.0 billion, reinforcing Chevron’s pledge to return surplus cash while maintaining investment in key growth projects.

Balance Sheet Strength and Capital Discipline Remain Central

Chevron’s balance sheet remains a strategic asset, with a net debt coverage ratio of about 1x, giving the company flexibility through commodity cycles and geopolitical uncertainty. Fourth-quarter organic capital expenditure was $5.1 billion, and full-year organic CapEx finished in line with prior guidance, underlining management’s insistence on capital discipline. Crucially for investors, Chevron reiterated its commitment to maintaining a dividend and CapEx breakeven below $50 Brent, suggesting the company can fund both growth and shareholder distributions even in a lower-price environment.

Cost Reduction Program Exceeds Early Targets

A central theme on the call was the success of Chevron’s structural cost reduction program, which delivered $1.5 billion of savings in 2025 and achieved a more than $2.0 billion annual run rate by year-end. Seeing momentum and additional opportunities, management raised its 2026 target to $3.0–$4.0 billion in sustainable savings, with more than 60% expected to stem from durable efficiency gains rather than one-offs. This cost-out effort is designed to structurally lower the company’s cost base, improve margins, and support Chevron’s breakeven targets across the commodity cycle.

Eastern Mediterranean: Building a New LNG and Gas Growth Hub

The Eastern Mediterranean region is emerging as a key long-term growth platform for Chevron. The company reached final investment decision on an expansion at Leviathan that will lift gross capacity to around 2.1 billion cubic feet per day (Bcf/d) by the end of the decade, while optimization at Tamar is expected to raise gross capacity to roughly 1.6 Bcf/d. Near-term expansions at Tamar and Leviathan, combined with front-end engineering work under way at Aphrodite and Cyprus, are set to materially increase regional gas volumes. Management expects these developments to roughly double related earnings and free cash flow by 2030, with potential upside tied to LNG commercialization.

Venezuela: Production Recovery and a Conditional Growth Option

Chevron highlighted Venezuela as both an operational success and a policy-sensitive opportunity. Since 2022, Chevron and its partners have raised production from Venezuelan ventures by more than 200,000 barrels per day under a venture-funded model that limits exposure on the corporate balance sheet. Management sees room to grow volumes by up to 50% over the next 18–24 months, contingent on necessary approvals and greater fiscal clarity. Venezuelan crude is already flowing into Chevron’s refining system, offering feedstock advantages, but the upside remains tightly linked to evolving regulatory and geopolitical conditions.

Project Start-Ups and Operational Momentum Lift Volume Outlook

Beyond the Permian, Chevron’s growth story is increasingly driven by offshore and mega-project execution. Recent and upcoming project start-ups in Guyana, the Gulf of America, and the Eastern Mediterranean are expected to collectively add about 200,000 boe/d of offshore production. At Tengiz, optimized maintenance schedules position the TCO asset to contribute around 30,000 boe/d of incremental growth in 2026. Together, these projects underpin Chevron’s expectation for strong production gains in the near term, with high-margin barrels supporting cash flow even in a softer price environment.

Shale Productivity Gains and Signs of Chemical Recovery

Chevron emphasized continued technical progress in its shale operations, particularly in the Permian. Drilling rig efficiency has more than doubled since 2022, significantly improving capital productivity. The company is also deploying proprietary chemical treatments that have delivered roughly a 20% improvement in 10‑month cumulative recovery on new wells and a 5–8% uplift on treated existing wells. Management believes these techniques can deliver at least a ~10% uplift in full-life recovery per treated well, translating into more barrels per dollar of capital and supporting long-term resource value. In chemicals, while near-term market conditions remain weak, the focus is on operational improvements rather than aggressive M&A in a depressed cycle.

Operational Hiccups at TCO and Ongoing Reliability Focus

The call also addressed a temporary power distribution issue at Tengizchevroil (TCO) that forced production into recycle mode and caused unplanned downtime. While operations have largely resumed, with expectations that most plant capacity would be back online within about a week and unconstrained production restored by February, an investigation into the root cause is ongoing. Management stressed that some throughput constraints still need further testing, underscoring that reliability at TCO will remain in the spotlight given the asset’s importance to Chevron’s growth and cash flow profile.

Earnings, FX and Cyclical Downturn Weigh on the Quarter

Fourth-quarter reported GAAP earnings came in at $2.8 billion, or $1.39 per share, with adjusted earnings of $3.0 billion, or $1.52 per share—about $600 million lower than the prior quarter. The period included $128 million of pension curtailment costs and about $130 million in negative foreign currency effects, both of which pressured results. In the Downstream segment, adjusted earnings declined, driven primarily by weaker Chemicals performance and lower refining volumes, reflecting a cyclical downswing in petrochemicals and some volume headwinds. Upstream earnings also felt the impact of lower liquids prices, with oil down nearly 15% year-over-year, although higher volumes and margins from high-return assets helped cushion the blow.

Geopolitical and Regulatory Risks: CPC Constraints and Venezuela Uncertainty

Management also acknowledged non-market risks around the portfolio. At the Caspian Pipeline Consortium (CPC), loading capacity was temporarily constrained after one mooring berth was damaged in a regional military incident, limiting export and loadout capacity and disrupting operations for several weeks. While berths are being restored, the event highlighted logistical and geopolitical vulnerabilities. In Venezuela, despite strong production gains, Chevron stressed that further expansion will depend on additional U.S. authorizations, fiscal stability, and clarity around recently passed hydrocarbon legislation. These factors introduce policy and execution risk into an otherwise promising growth avenue.

Chemicals Cycle and M&A Timing Remain a Strategic Challenge

On the subject of chemicals, Chevron was candid about the challenges posed by a weak cycle. Depressed margins and industry-wide softness make the timing of any major acquisition difficult: attractive targets require both reasonable pricing and willing sellers, conditions that may not align in the near term. As a result, Chevron is prioritizing organic improvements and operational efficiency within existing assets rather than stretching for deals in a downcycle. This stance fits with management’s broader capital discipline narrative, even as it continues to view chemicals as a long-term strategic complement to its upstream and refining footprint.

Guidance: Double-Digit Volume Ambitions and Cash-First Discipline

Looking ahead, Chevron’s guidance points to continued production-led and cash-backed growth. The company reaffirmed its 2026 TCO free cash flow target of $6.0 billion (Chevron share) at $70 Brent and expects companywide production to grow 7–10% year-over-year, excluding asset sales. That increase is driven by approximately 200,000 boe/d from recent and upcoming offshore start-ups and an additional ~30,000 boe/d from TCO, with the Permian expected to hold above 1,000,000 barrels per day for a full year as Chevron advances toward a 300,000 boe/d target for 2026 from that region alone. Financially, management reiterated its dividend and CapEx breakeven below $50 Brent, a structural cost-savings goal of $3–4 billion by 2026, and continued capital discipline supported by a net debt coverage ratio around 1x. The company also highlighted a 4% increase in the quarterly dividend, signaling confidence in long-term cash generation even after returning more than $14.0 billion to shareholders and investing $5.1 billion in organic CapEx in the latest quarter.

In sum, Chevron’s earnings call painted the picture of a company leaning into growth while tightly managing its balance sheet and cost base. Record production, strong free cash flow, and a deep pipeline of projects across the Permian, TCO, Guyana, and the Eastern Mediterranean provide a clear volume and cash trajectory, even as lower oil prices, weak chemicals markets, and geopolitical uncertainties present near-term challenges. For investors, the key takeaways are a sustained commitment to hefty shareholder returns, rising structural efficiency, and a portfolio increasingly tilted toward high-margin barrels and long-life gas assets that can support performance across the commodity cycle.