Chevron’s Free Cash Flow Soars Despite Falling Oil Prices

Date of Call: Jan 30, 2026

Financials Results

• EPS: $1.39 per share (adjusted $1.52 per share)

Guidance:

• Full year 2026 guidance of $6 billion of Chevron share free cash flow from TCO at $70 Brent is unchanged.
• Expect continued growth in cash flow, driven by low-risk production growth, ongoing cost savings and continued capital discipline.
• Production growth expected to contribute to a 7% to 10% increase year-over-year, excluding impact of asset sales.
• Target of $3 billion to $4 billion in structural cost reductions by end of 2026.

Business Commentary:

Production and Portfolio Growth:

• Chevron reported record levels of production, achieving 1 million barrels of oil equivalent per day in the Permian and ramping up projects like Ballymore and Whale.
• The growth was supported by strategic actions such as the completion of the Tengiz project and the acquisition of Hess, which created a premier upstream portfolio.

Financial Performance and Cash Flow:

• Chevron's adjusted free cash flow increased by over 35% year-over-year, even with a 15% decrease in oil prices.
• Financial performance was driven by high production levels, strategic asset sales, and cost savings, despite a challenging market environment.

Eastern Mediterranean and Offshore Projects:

• Projects in the Eastern Mediterranean, such as the Leviathan expansion, are expected to increase gross capacity to 2.1 billion cubic feet per day.
• This growth is anticipated to double current earnings and free cash flow, supported by strategic developments like the FID on new projects.

Cost Reduction and Efficiency Improvements:

• Chevron achieved $1.5 billion in cost reductions in 2025, with a target of $3 billion to $4 billion by the end of 2026.
• The improvements were due to organizational changes, technology integration, and operational efficiencies across the supply chain.

Strategic Focus on Venezuela:

• Chevron saw an opportunity to increase production in Venezuela by 200,000 barrels per day since 2022 and anticipates further growth of up to 50% in the next 18-24 months.
• The company is committed to leveraging its expertise and partnerships in compliance with U.S. laws to recover outstanding debt and enhance production.

Sentiment Analysis:

Overall Tone: Positive

• Management stated: 'Chevron is bigger, stronger and more resilient than ever. We're entering 2026 from a position of strength, and we'll continue building on our momentum in the years ahead.' Also highlighted strong results, record production, and industry-leading free cash flow growth.

Q&A:

• Question from Arun Jayaram (JPMorgan Chase & Co): Elaborate on moving pieces around TCO volumes in 2026 including optimized maintenance schedule and discuss power distribution issue and debottlenecking potential.
  Response: Power issue was addressed safely; production is ramping back. Maintenance optimization and debottlenecking efforts (e.g., column re-tray) are expected to support full-year production near original plan.

• Question from Neil Mehta (Goldman Sachs Group, Inc.): Unpack Venezuela asset conditions, resource potential, and self-funding model.
  Response: Operations continue uninterrupted; production grew 200k boe/day since 2022, with potential for further 50% growth over 18-24 months. Activities are funded through venture cash flows.

• Question from Douglas George Blyth Leggate (Wolfe Research, LLC): Impact of Kazakhstan compensation cuts on Tengiz and if further cuts are expected.
  Response: Cannot comment on OPEC+ matters; historically TCO has not been significantly impacted due to attractive fiscal terms.

• Question from Ryan Todd (Piper Sandler & Co.): Drivers of progress in Eastern Mediterranean, keys to Aphrodite, and additional opportunities.
  Response: Focus on near-term project startups (Tamar, Leviathan) and expansion (2.1 Bcf capacity by end decade). Aphrodite entered FEED; exploration ongoing offshore Egypt.

• Question from Devin McDermott (Morgan Stanley): Early results from new operating model and organizational changes on cost and operations.
  Response: New model live and well; $1.5B savings delivered, run rate >$2B. Seeing results in operational efficiency (e.g., shale chemicals optimization, AI in supply chain).

• Question from Sam Margolin (Wells Fargo Securities, LLC): Impact of Permian productivity gains on capital efficiency and decision-making.
  Response: Permian held at 1M boe/day, optimizing cash generation; drilling efficiency more than doubled since 2022. No change to decision-making; focus remains on cash flow growth.

• Question from Paul Cheng (Scotiabank Global Banking and Markets): Opportunity set in Libya and Iraq, and LNG portfolio strategy.
  Response: Engaged in discussions in Libya and Iraq; need compelling value opportunities. LNG portfolio small but competitive; looking at U.S. offtake and projects that meet return thresholds.

• Question from Stephen Richardson (Evercore ISI Institutional Equities): How to maintain upside leverage while developing new opportunities.
  Response: Portfolio has been high-graded; focus on growing cash flow, driving breakevens down, and applying base business excellence. Balance sheet provides resilience.

• Question from Biraj Borkhataria (RBC Capital Markets): Step-up in business development efforts and portfolio diversification.
  Response: More attractive opportunities emerging globally; selective and disciplined. Concentrated portfolio allows application of technology and best practices; underweight in Middle East.

• Question from Manav Gupta (UBS Investment Bank): Tailwinds to refining margins from competitor closures in California and using Venezuelan heavy sour barrels.
  Response: Venezuelan crude runs in Pascagoula refinery; potential to increase throughput. California refining environment competitive; market forces drive higher fuel prices there.

• Question from Alastair Syme (Citigroup Inc.): Suitability of reserve life metric given lower reserve life.
  Response: Reserve replacement ratio important but not only metric; 2025 RRR led peer group. Long-term trends and competitive metrics also considered.

• Question from Jean Ann Salisbury (BofA Securities): Early results from chemical surfactants in DJ or Bakken.
  Response: Primarily focused on Permian with 20%+ recovery improvement; pilots underway in DJ and Bakken, results pending. Part of broader program to double shale recovery.

• Question from Wei Jiang (Barclays Bank PLC): Performance of Bakken relative to expectations and cross-learning.
  Response: Applying best practices from other basins; optimized development to reduce capital, maximize value. Targeting ~200k boe/day and focus on cash flow.

• Question from Geoff Jay (Daniel Energy Partners): Factors behind sequential margin improvement in U.S. upstream.
  Response: High-margin Gulf of America production, Permian/DJ/Bakken efficiency gains, and structural cost reductions contributing to margin expansion.

• Question from Bob Brackett (Bernstein Institutional Services LLC): Absorption of Venezuelan heavy crude in U.S. refining system.
  Response: Markets will redistribute; light/heavy spreads will adjust. No simple rule of thumb, but increased Venezuelan crude will impact global flows.

• Question from Phillip Jungwirth (BMO Capital Markets Equity Research): Benefits of owning more CPChem and other avenues to grow petchems exposure.
  Response: CPChem well-run; long-term outlook positive. Would like more exposure, but deals require partner willingness. Also has large aromatics position at GS Caltex.

• Question from Paul Sankey (Sankey Research LLC): Cause of TCO power outage and loading berth issue.
  Response: Power issue under investigation, likely mechanical. Loading berth reduction due to military submarine drone attack; now back to two berths.

• Question from Jason Gabelman (TD Cowen): Use of cash vs. equity for M&A and balance sheet metric preference.
  Response: Deal consideration negotiated; equity preferred for large, long-cycle deals to hedge commodity risk; cash also used. Debt metrics updated for consistency with rating agencies.

Contradiction Point 1

TCO (Tengizchevroil) Operational Timeline and Capacity

Contradiction on when TCO will achieve full production capacity, impacting operational reliability and future production forecasts.

What factors will influence TCO volumes in 2026, particularly regarding the optimized maintenance schedule, and how will power distribution system issues and debottlenecking efforts impact productive capacity? - Arun Jayaram (JPMorgan Chase & Co)

2025Q4: The TCO power issue was addressed proactively... Full capacity is expected back online within the coming week, with unconstrained production by February. - Michael Wirth(CEO)

Can you explain the TCO (Tengizchevroil) update on Slide 6, including the schematic and critical path issues? - Neil Mehta (Goldman Sachs Group, Inc.)

2023Q4: The schedule and cost guidance provided in November remains on track... The FGP (Future Growth Project) startup is expected in H1 2025. - Michael Wirth(CEO)

Contradiction Point 2

Permian Basin Production Strategy and Capital Efficiency

Contradiction on the capital expenditure needed as production nears 1 million BOE/day, affecting financial planning and investment outlook.

How does improved capital efficiency in the Permian influence decision-making and strategy? - Sam Margolin (Wells Fargo Securities, LLC)

2025Q4: The Permian strategy is on track: holding production at 1 million barrels per day and optimizing cash generation... Decision-making remains unchanged—focused on cash flow growth and capital discipline. - Eimear Bonner(CFO)

With Permian production approaching 1 million BOE/day, will 2024 CapEx stay at $5 billion or increase to $6 billion? - Joshua Silverstein (UBS)

2023Q4: The company does not anticipate needing to go to $6 billion. Starting with 12 rigs and 3 frac crews... as production plateaus, capital spending can be maintained at lower levels to offset decline rather than fund aggressive growth. - Michael Wirth(CEO)

Contradiction Point 3

Venezuelan Crude Supply and Market Impact

Contradiction on whether Venezuelan crude flows will materially impact results, affecting refining operations and financial performance outlook.

What tailwinds are impacting your refining portfolio from California competitor closures and potential use of Venezuelan heavy sour crude? - Manav Gupta (UBS Investment Bank)

2025Q4: Chevron is using ~50,000 barrels per day of Venezuelan crude... and can absorb an additional 100,000 barrels per day across its U.S. system. - Michael Wirth(CEO)

What is the current status of production and contract structures in Venezuela? - Jean Ann Salisbury (BofA Securities)

2025Q2: A limited amount of oil will flow to the U.S. in Q3, consistent with sanctions policy, which helps meet debt obligations. Flows will not materially impact results. - Michael Wirth(CEO)

Contradiction Point 4

TCO Operations and Capacity

Contradiction on TCO's operational status and capacity potential, affecting asset performance and future operational plans.

Could you discuss the factors affecting TCO volumes in 2026, including the optimized maintenance schedule, power distribution system challenges, and potential debottlenecking to boost productive capacity? - Arun Jayaram (JPMorgan Chase & Co)

2025Q4: The TCO power issue was addressed proactively; production was suspended to ensure safety, and the facility is now being restarted. Full capacity is expected back online within the coming week, with unconstrained production by February. - Michael Wirth(CEO)

What's the current status of the concession extension discussions in Kazakhstan (TCO)? - Devin McDermott (Morgan Stanley)

2025Q3: TCO has created significant value over 32 years as a standalone entity, with strong performance. Negotiations are complex and just beginning; no quarterly updates expected. - Michael Wirth(CEO)

Contradiction Point 5

Permian Capital Intensity and Growth Strategy

Contradiction on the capital intensity and strategic focus for the Permian and overall portfolio, impacting long-term growth and investment strategy.

How does improved capital efficiency in the Permian influence decision-making and the overall strategy? - Sam Margolin (Wells Fargo Securities, LLC)

2025Q4: The Permian strategy is on track: holding production at 1 million barrels per day and optimizing cash generation. - Eimear Bonner(CFO)

Given the Permian's 1 million barrels of oil equivalent per day production and moderated spending plans, what should we expect for the 2026–2027 capital budget compared to 2025? - Biraj Borkhataria (RBC)

2025Q2: The Permian’s large acreage and low breakeven allow for strong returns and sustained cash flow. Capital spend for 2025 is expected to be at the lower end of the $4.5–$5 billion range, with further reductions in 2026 as the focus shifts to free cash flow generation. - Mark Nelson(Vice Chairman)