Chevron's Q3 2025 Earnings Call: Contradictions in Permian CapEx, Exploration Strategy, and Tengiz Production

Date of Call: October 31, 2025

Financials Results

• EPS: GAAP earnings $3.5B, or $1.82 per share; adjusted earnings $3.6B, or $1.85 per share; adjusted earnings up $575M vs prior quarter and down $900M vs prior year; special items totaled $235M; foreign currency increased earnings by $147M.

Guidance:

• Full-year organic CapEx (inclusive of Hess) expected at $17.0–$17.5B.
• Full-year average production growth expected at the top end of the 6%–8% guidance range, excluding legacy Hess.
• Hess integration synergies on track; $1B synergy target to deliver run-rate savings this year; structural cost program captured ~$1.5B annual run-rate savings to date.
• Expect continued strong cash generation and shareholder returns; adjusted FCF was $7B in Q3.
• Q4 includes a planned TCO pit stop that will reduce production and affect affiliate cash timing.

Business Commentary:

* Record Production and Free Cash Flow: - Chevron reported record production of over 4 million barrels of oil equivalent per day in Q3 2025. - The growth was primarily attributed to high reliability across the upstream, with strong contributions from the Hess integration and projects like Ballymore and ACES green hydrogen. - The company also delivered strong cash generation, supporting sustained shareholder distributions.

• Permian Production Success:
• Chevron's production in the Permian Basin exceeded 1 million barrels per day, highlighting significant efficiency gains.

• This was driven by a consistent manufacturing approach, improved technology, and better capital efficiency, despite fewer rigs and completion spreads.

• Exploration and New Opportunities:

• Chevron plans to increase exploration activity, focusing on both mature areas and early entry into high-impact frontier areas, such as Suriname and Brazil.

• The company aims to expand its exploration portfolio, driven by the appointment of a new Head of Exploration and the need to balance unconventional development with external opportunities.

• Hess Integration and Synergies:

• The integration of Hess assets led to $150 million in contributions during Q3, with synergies expected to deliver a $1 billion annual run-rate savings by year-end.
• The synergies are being realized through the utilization of NOLs, production cancellations, and operational efficiencies, contributing to financial performance and strategic goals.

Sentiment Analysis:

Overall Tone: Positive

• "record production and strong cash generation"; "Worldwide production exceeded 4 million barrels of oil equivalent per day"; adjusted earnings rose $575M sequentially; "we've captured approximately $1.5 billion in annual run-rate savings so far" — management emphasized production growth, integration synergies and strong cash flow coverage of shareholder returns.

Q&A:

• Question from Sam Margolin (Wells Fargo Securities, LLC): Can you elaborate on what drove the Permian result — better field results, capital efficiency, co-op vs NOJV acreage, or broader industry efficiency gains?
  Response: Permian outperformance driven by efficiency gains (fewer rigs/completion spreads, technology, small operational improvements); Chevron will continue to moderate growth and prioritize cash generation while production may fluctuate quarter-to-quarter.

• Question from Devin McDermott (Morgan Stanley): Update on Kazakhstan concession-extension discussions following your September meeting with the President — status and color on negotiations?
  Response: Negotiations have started constructively with technical and commercial teams engaged; process is complex and early-stage, will take time and not warrant regular quarterly updates.

• Question from Neil Mehta (Goldman Sachs Group, Inc.): Initial observations on the Bakken asset under Chevron: adjustments to activity plans, is it core and can it compete for capital as part of a Rockies corridor?
  Response: Bakken is an attractive addition at ~200k boe/d plateau with opportunities to improve capital and operating efficiency; Chevron will optimize and thoughtfully assess its long-term role — no rush decision.

• Question from Ryan Todd (Piper Sandler & Co.): What drove the stronger-than-expected Hess contribution — drivers of strong performance and key takeaways on ownership?
  Response: Performance driven by strong production growth and on-track integration synergies; $1B synergy target confirmed to deliver run-rate savings this year, and Hess personnel add valuable capabilities.

• Question from Douglas George Blyth Leggate (Wolfe Research, LLC): How do you view the role of exploration and associated spending going forward given hires and organizational changes?
  Response: Chevron will rebalance toward a broader exploration program — both mature and frontier areas — increasing resources (people and capital) and speeding decision-making to pursue higher-impact opportunities.

• Question from Biraj Borkhataria (RBC Capital Markets): Updated thoughts on Namibia prospectivity after one non-commercial well and plans for a 10-well permit — will you add exposure or drill more?
  Response: Namibia remains prospectively attractive; the initial well provided useful data, Chevron farmed into additional blocks, has permits up to 10 wells but will proceed based on results and may pursue further optimization or inorganic opportunities.

• Question from Paul Cheng (Scotiabank Global Banking and Markets): Have you changed how you manage base operations to achieve better performance and should we assume a lower underlying base decline (~3%) going forward?
  Response: Lower declines reflect deliberate changes — asset-class alignment, focus on 'little things', technology/automation and portfolio mix (facility-limited assets) — making moderated base declines repeatable and intentional.

• Question from Stephen Richardson (Evercore ISI): Perspective on the California refining market amid shutdowns, policy shifts and inbound supply changes — implications for Chevron?
  Response: Policy-driven supply tightening is changing the market; marine imports and potential pipeline projects are being considered but are complex; Chevron can compete in-state but returns will be shaped by evolving state policy and supply dynamics.

• Question from Jean Ann Salisbury (BofA Securities): Post-Hess, are you comfortable with a portfolio weighted more to upstream versus downstream/chemicals or would you seek to rebalance?
  Response: Chevron is comfortable with an ~85% upstream / 15% downstream mix long-term; will selectively grow petrochemicals but does not plan to materially shift toward downstream.

• Question from Jason Gabelman (TD Cowen): Equity affiliate distributions have beaten guide year-to-date — what's driving the beat and should it continue into Q4/next year?
  Response: Outperformance is primarily TCO-driven (strong, reliable operations); guidance unchanged because Q4 includes a planned TCO pit stop and TCO must conserve cash for two loan repayments next year.

• Question from Arun Jayaram (JPMorgan Chase & Co): On TCO — are you ramped to capacity after sequential liquids growth and is the asset at planned capacity?
  Response: TCO is operating reliably at planned nameplate with smooth start-up of complex trains; Q4 will include a scheduled pit stop that will reduce production temporarily; potential debottleneck upside exists but it's premature to change guidance.

• Question from Phillip Jungwirth (BMO Capital Markets): With Permian gas value improving, how do you market Permian streams today and what more can you do to maximize value?
  Response: Chevron markets nearly all company-operated Permian streams (oil, NGLs, gas) and uses firm transport capacity to capture arbitrage; the company will continue to optimize marketing and transportation to maximize value.

• Question from Lucas Herrmann (BNP Paribas): For the large CPChem projects with Qatar Energy coming online, what's the expected incremental cash flow and will CPChem CapEx fall and distributions rise?
  Response: Projects are world-scale, low-cost and competitively positioned with expected ~20% IRR; Chevron's cash exposure is through CPChem JV ownership share and more detail on cash impacts will be provided at Investor Day.

• Question from Paul Sankey (Sankey Research LLC): How has the macro changed since your last analyst meeting and how will it set the stage for the upcoming Investor Day?
  Response: While geopolitics, policy, AI and other macro factors have shifted, Chevron's core fundamentals and disciplined strategy remain intact; Investor Day will present a consistent, long-term outlook emphasizing cash and earnings growth through discipline and portfolio strength.

• Question from Bob Brackett (Sanford C. Bernstein & Co., LLC.): With views that oil could be oversupplied in 2026 and shale pausing for OPEC spare capacity, what's the state of the Permian and your forecast into next year?
  Response: Rig counts are near multiyear lows (~250) and most expect current activity to maintain production levels; the Permian is likely to plateau or be flattish next year, responsive to market signals rather than rapid growth.

• Question from Geoff Jay (Daniel Energy Partners, LLC): Given a material uptick in Argentina this quarter and acreage similar to the DJ, what's Argentina's production potential over 2–3 years and key gating factors?
  Response: Argentina's Vaca Muerta positions are high quality with upside; modest near-term growth (~25k b/d in 2025) and further scale depends on continued policy and macro improvements that would enable greater capital allocation.

• Question from James West (Melius Research LLC): As peers cut CapEx and rigs, what's Chevron's differentiator enabling you to hit ~1 million b/d in the Permian and sustain success?
  Response: Scale and a manufacturing-like, steady development approach (planning and executing consistently), combined with productivity gains (~40% improvement in drilling) and stable NOJV activity, drive Chevron's superior Permian performance.

Contradiction Point 1

Capital Expenditure (CapEx) Plans for the Permian

It involves differing expectations regarding the direction and magnitude of capital expenditure in the Permian region, which impacts Chevron's production strategy and financial outlook.

Can you compare 2026 and 2027 capital spending versus 2025 spending in the Permian? - Biraj Borkhataria (RBC)

2025Q3: We've already hit and surpassed our peak CapEx, and we're managing a sustained performance in the Permian. We should see CapEx drop further as we focus on free cash flow generation. - Michael Wirth(CEO)

How will the Bakken asset, acquired from Hess, fit into your portfolio? - Neil Mehta (Goldman Sachs)

2025Q2: We're excited to add the position to our shale & tight portfolio. Hess planned to maintain a plateau of 200,000 barrels a day. We expect to optimize capital efficiency, similar to Permian. - Mark Nelson(CFO)

Contradiction Point 2

Exploration Spending and Strategy

It highlights differing approaches to exploration spending and prioritization, which affects Chevron's long-term growth prospects and investment strategies.

How important is exploration for your large U.S. shale production? - Paul Sankey (Sankey Research)

2025Q3: We're shifting to a more balanced approach, expanding frontier exploration. We'll increase spending in mature areas and new early entry. - Michael Wirth(CEO)

What is Chevron's outlook for exploration spending and its future role as shale matures? - Douglas George Blyth Leggate (Wolfe Research, LLC)

2025Q2: We're expanding exploration, focusing on areas with existing infrastructure and frontier opportunities. Expect operational changes and growth in exploration. - Michael Wirth(CEO)

Contradiction Point 3

Permian Production Efficiency

It highlights differing perspectives on the efficiency and production levels in the Permian, which are critical for understanding Chevron's operational performance and growth strategy.

What drove the Permian result—better efficiency or industry trends? - Sam Margolin (Wells Fargo Securities, LLC)

2025Q3: We had a strong quarter. We're 60,000 barrels a day over the million-barrel mark, driven by efficiency gains. - Michael Wirth(CEO)

What drove the Permian Delaware Basin's 2024 performance, and how will it impact the 2025 outlook? - Ryan Todd (Piper Sandler)

2025Q1: The improvement in the Permian was due to better performance in the second Bone Spring and other formations. The 2025 type curves are expected to be similar, with 85% of the program in the Delaware. - Michael Wirth(CEO)

Contradiction Point 4

Liquids Production at Tengiz

It involves differing expectations for liquids production from the Tengiz field, which impacts Chevron's overall production and financial outlook.

Are you at capacity with TCO liquids production? - Arun Jayaram (JPMorgan Chase & Co)

2025Q3: TCO is performing well with reliable production. Planned maintenance in Q4, but we see opportunities to optimize capacity. - Michael Wirth(CEO)

Can you outline your perspective on PCO, including the startup, concession extension discussions, production levels, and curtailment risks? - Neil Mehta (Goldman Sachs)

2025Q1: TCO production will average around 1.2 million barrels a day in the first quarter of 2025. The first phase of the Future Growth Project achieved its nameplate capacity of 1 million barrels of liquids. - Michael Wirth(CEO)

Contradiction Point 5

Affiliate Equity Distribution Guidance

It highlights changes in guidance for affiliate equity distributions, which are crucial for understanding Chevron's cash flow and financial strategy.

Why is equity affiliate distribution exceeding guidance, and will this continue? - Jason Gabelman (TD Cowen)

2025Q3: The strong performance is due to TCO's exceptional performance. Guidance reduced due to TCO pit stop and loan repayments. - Eimear Bonner(CFO)

How does reduced non-operated and royalty volumes in the Permian impact Chevron's production? - Josh Silverstein (UBS)

2025Q1: We expect equity affiliate distribution to be reduced from a reported $6 billion in the first half of 2024 to $4 billion for the first half of 2025. - Eimear Bonner(CFO)