What Risks Does Chevron Face in this Oil-Demanding Environment?

Chevron (CVX) is an energy giant that engages in the production, development, and transportation of crude oil and natural gas.

Last month, the company reported strong fourth-quarter earnings, although earnings did miss expectations. The company’s revenues climbed 91% year-over-year to $48.13 billion. Meanwhile, adjusted earnings per share were $2.56 per share, up from $0.16 per share in the year-ago quarter.

Let’s look at the risk factors for Chevron using the new Tipranks Risk Factors tool.

Risk Factors

Chevron’s main risk category is Legal and Regulatory, which accounts for 5 of the total 13 risks identified. The next major Chevron risks come under the Production category and Macro & Political category, which account for 3 risks each.

In its recent 10K report, the organization warned investors about two new risks.

Both of the new risk factors were added by Chevron in the Legal and Regulatory category.

To begin with, Chevron highlights that tax rules and regulations are often revised in response to changing political and economic realities. As a result of the change in tax regulations, the corporation may be compelled to pay greater tax liabilities. Chevron also acknowledges that its tax returns are reviewed by tax authorities all around the world. This can occasionally cause differences with tax authorities, who might levy penalties on the firm, negatively impacting the company’s financial situation.

Second, Chevron informs investors that the company’s environmental, social, and governance (ESG) targets and disclosures may expose the company to a variety of risks.

The corporation said in 2021 that it had established a goal to reach net-zero carbon emissions by 2050. In this context, the corporation set a goal of becoming net-zero for equity upstream Scope 1 and 2 emissions by 2050. In addition, Chevron set near-term greenhouse gas (GHG) emission-related objectives for environmental safety. Chevron warns that failing to achieve these objectives poses a number of risks to the firm, including operational, financial, regulatory, and reputational concerns, all of which might have a substantial negative impact on the company’s brand name, and ultimately on the share price.

Wall Street’s Take

Turning to Wall Street, the stock has a Strong Buy consensus rating, based on 12 Buys and 4 Holds. The average CVX price target of $143.38 implies 2.1% upside potential to current levels.

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