Chevron delivers solid results in 4Q driven by US operations
- Adjusted earnings of US$6.5bn in 4Q23 a slight beat on the back of strong US production trends
- Record cash returned to shareholders in 2023, up 18% over 2022, which was a record year for earnings
- Guided to 4-7% production growth in 2024, Hess acquisition a longer term driver
- Reiterate BUY rating with target price of US$174
Chevron reported robust financial performance for 2023. 4Q23 adjusted earnings came in at US$6.5bn (up 13% q-o-q, slightly better than estimates), excluding US$3.7bn in one-off charges pre-announced in January. For FY23, adjusted earnings of US$24.7bn was 33% lower y-o-y, a trend largely similar across all oil majors – reporting 2023 profits about a third lower than 2022 record levels. Cash flow from operations (CFO) was US$38.8bn, and Chevron maintained its financial priorities, delivering a record US$26.3bn cash returned to shareholders, including US$11.3bn in dividends and US$14.9bn in share repurchases (32% higher y-o-y). Quarterly dividend payable in 1Q24 was increased 8%. Worldwide production increased 4% to a record 3.12 million barrels per day, led by 14% increase in US production, which set a new record on the back of 10% growth in the Permian Basin as well as the PDC acquisition.
Chevron expects higher production growth of 4-7% in 2024. Additional volumes are expected from a full year of PDC Energy assets and further ramp up in the Permian Basin toward 1 million barrels per day by 2025. The Wellhead Pressure Management Project at Tengiz (TCO) in Kazakhstan is on track for initial start-up in second quarter 2024, while the Future Growth Project is slated for 1H-2025 start up, which will enable increased production, though delayed. Organic capex guidance for 2024 is unchanged at US$15.5-16.5bn, compared to US$15.8bn capex in 2023. Chevron has also announced the significant US$53bn acquisition of Hess Corporation, which strengthen’s long term prospects in US shale as well as Guyana. Given the robust growth outlook and reasonable valuations, we maintain our BUY rating on Chevron with a target price of US$174.