Chevron (CVX) Last Update 3/18/24
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TREFIS Analysis

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Potential upside & downside to trefis price

Chevron Company


  1. Downstream constitutes 68% of the Trefis price estimate for Chevron's stock.
  2. Upstream constitutes 21% of the Trefis price estimate for Chevron's stock.


Chevron Saw A Strong Q3

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:

Crude Oil and Natural Gas Liquid (NGL) Production

  • Average Crude Oil and NGL Sales Price: 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 till 2016, causing 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 and $38 per barrel in 2016. 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.


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.

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.


Peak oil

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.

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.

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.