Chevron (CVX) Last Update 6/13/22
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TREFIS Analysis

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Potential upside & downside to trefis price

Chevron Company


  1. Downstream constitutes 70% of the Trefis price estimate for Chevron's stock.
  2. Upstream constitutes 23% of the Trefis price estimate for Chevron's stock.


Post Pandemic Recovery

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.

The average crude oil production price realization by Chevron has ranged from $46/bbl in 2015, $38/bbl in 2016, $48/bbl in 2017, $62/bbl in 2018 to $54/bbl in 2019. Thus, cash flows from operations ranged from $13 billion in 2016 to $30 billion in 2018.

Per EIA, the Brent benchmark is likely to trend downward from $103 in 2022 to $97 in 2023. Similarly, the World Bank expects Brent crude to observe a decline from $100 in 2022 to $92 in 2023 and $80 in 2024. While the West has imposed stringent sanctions on Russia, the oil & gas embargo is a difficult decision due to multiple transportation and economic concerns.

Given the volatile price environment, the company has been returning excess cash to shareholders through buybacks when prices were high. In the past five years, the company generated $101 billion of cash from operations, allocated $68 billion for capital expenses, paid $43 billion in dividends, and returned $3 billion through buybacks.

In May 2020, the OPEC and allied nations slashed 10% of global supply (around 9.7 mb/d) due to low demand. Currently, the cartel is increasing production by 0.4 mb/d on a monthly basis until the 5.8 mb/d curtailment gets phased out. Upstream companies are likely to increase capital spending given the high benchmark prices.

Thus, higher capital spending by American oil companies is a potential indicator of rising supply and a correction in benchmark prices.

Chevron is committed to maintaining a strong balance sheet and returning capital to shareholders in the coming years. Despite an uncertain demand-supply environment, the company’s third-quarter results got a boost from high benchmark prices, assisting deleveraging plans.


Below are key drivers of Chevron's value that present opportunities for an upside or downside to the current Trefis price estimate for Chevron:

Crude Oil and Natural Gas Liquid (NGL) Production

  • Average Crude Oil and NGL Sales Price: The average liquid sales price increased from $48.23 in 2005 to $90.96 in 2008, before declining to $57.86 in 2009 during the economic downturn. The global economy recovered in 2010, pushing prices to $74.04 for the year. Prices continued to rise in 2011 as well, increasing to $100.79 per barrel. However, since 2011, oil prices remained relatively flat around the $100 per barrel mark, until 2014. In 2014, the oil markets became oversupplied because of the rapid increase in production from tight oil reserves in the U.S., and prices crashed during the second half of the year. Consequently, Chevron's Average Crude Oil and NGLs Sales Price declined to almost $89 per barrel in 2014. The oil glut continued in 2015, causing the commodity prices to fall more than 50% during the year. As a result, Chevron's price realization dropped to almost $46 per barrel in 2015. It fell further to $38 per barrel in 2016 due to the persistently low commodity prices during the year. However, 2017 saw a sharp surge in prices and the figure stood at $49. Average crude pricing in 2018 came in at $62 a barrel. The realized price increased slightly to $68/bbl in 2021.
    We currently estimate the oil prices to improve gradually in the near term due to the Russia-Ukraine war and subsequently decline as new energy alliances create downward pressure. If oil prices sustain at $120/bbl in the next two years, there is a 20% upside to the current estimate.

  • Crude Oil and Total Liquids Produced: In 2014, the total production stood at 1.40 million barrels per day. However, despite depressed commodity prices in 2015, the company's production remained relatively flat at 1.4 million boed in 2015. It continued to grow gradually to 1.5 million boed in 2019. However, the figure jumped sharply to 1.8 million boed in 2021.
    The operating margins are significantly volatile with a strong dependence on benchmark prices and total production. With the company having a downstream refining business, these margin fluctuations affect the bottom line significantly. Lower production has a downside risk on cash flows and margins. If oil production declines to 1.5 million boed as seen before the pandemic, there is a 20% downside to the current estimate.

For additional details, select a driver above or select a division from the interactive Trefis split for Chevron at the top of the page.


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:

Higher profitability compared to downstream activities like refining

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. We estimate that EBITDA margins for crude oil and NGL production were around 47% in 2017 compared to an EBITDA margin of 2.5% for its refined product sales during the year.

The difference in margins is attributable to the fact that the cost of production per barrel is quite low for crude oil compared to its selling price. 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.


Peak oil

It is estimated that a large part of the world's oil reserves have 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.

Improvements in technology

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.