Chevron's Q1 Earnings Hinge on Oil Prices and Kazakhstan Gains

Chevron’s upcoming Q1 2025 earnings report is expected to show a flattish performance compared to the prior quarter, according to RBC Capital Markets, as the oil giant navigates a precarious balance between rising production in Kazakhstan and the headwinds of weak crude prices. Analysts at RBC maintained an Outperform rating with a $175 price target, signaling confidence in Chevron’s long-term resilience, even as near-term challenges loom large.

The Q1 Results: A Narrow Miss, But Operational Strength

Chevron reported Q1 2025 earnings of $2.07 per share, narrowly missing the consensus estimate of $2.14. The shortfall stemmed from increased oil production in Kazakhstan through its Tengizchevroil joint venture—a bright spot overshadowed by broader industry pressures. The venture’s output rose to 700,000 barrels per day, a key driver of operational stability despite lower crude prices.

RBC emphasized that Chevron’s Kazakhstan operations remain a critical pillar of its production strategy. While geopolitical risks persist—including Kazakhstan’s recent shift away from OPEC+ alignment—the company’s deep-seated partnerships in the region have insulated it from abrupt policy shifts.

The Breakeven Price: Chevron’s Achilles’ Heel

RBC’s analysis underscores a critical vulnerability: Chevron requires a Brent crude price of $95 per barrel to sustain both dividends and buybacks, a threshold far above its peers. In contrast, ExxonMobil, the U.S. oil giant, needs only $88 per barrel for the same obligations.

With Brent prices languishing in the $60s—well below Chevron’s breakeven—analysts project the company will slash buybacks to the low end of its $10–$20 billion annual guidance. At $60 per barrel, RBC estimates buybacks could fall to $11 billion, forcing Chevron to prioritize dividends over shareholder returns. This tightrope act could strain investor confidence in a company historically lauded for its disciplined capital allocation.

Buybacks, Dividends, and the Cost-Cutting Gambit

Chevron’s strategy to cut $3 billion in costs and lay off up to 8,000 employees aims to offset the revenue drag from depressed oil prices. Yet, even with these measures, the company remains more exposed than Exxon, which boasts $13 billion in surplus cash and a lower breakeven price.

The stakes are high: if Brent stays in the mid-$60s, Chevron’s Q1 2025 earnings could see a 21.5% year-over-year decline in EPS to $2.30, per Zacks Investment Research. Revenues are also projected to dip 1.8% to $47.85 billion, reflecting the industry-wide squeeze.

RBC’s Outlook: Outperform Amid Uncertainty

RBC’s bullish stance hinges on two assumptions:
1. Kazakhstan’s stability: Continued production growth from Tengizchevroil could offset near-term price volatility.
2. Buyback continuity: Management’s commitment to maintaining buybacks at $10 billion annually—even at lower oil prices—would reassure investors.

However, the firm’s $175 price target (versus Chevron’s current $139.12 share price) assumes a rebound in oil prices to $80–$90 by mid-2025, a scenario growing less certain as recession fears mount.

The Investor’s Dilemma: Value or Volatility?

Chevron’s 5.4% dividend yield offers a rare source of income in a low-yield world, but its stock has underperformed Exxon’s +12% year-to-date gain as investors favor lower-breakeven peers. The Zacks Earnings ESP model further clouds the outlook, predicting a -5.51% surprise risk for Q1—a red flag for bulls.

Conclusion: Chevron’s Fate is Tethered to Oil and Kazakhstan

Chevron’s Q1 results will be a litmus test for its ability to navigate the oil price slump. While RBC’s Outperform rating reflects confidence in its operational prowess and $175 price target, the path to that valuation hinges on two variables:

1. Oil prices: A rebound to $95/Brent would unlock buybacks and dividends, boosting EPS and stock performance.
2. Kazakhstan’s role: Tengizchevroil’s output growth must offset production declines elsewhere, a feat increasingly dependent on geopolitical calm.

For now, Chevron’s stock trades at a 16x forward P/E ratio, cheaper than Exxon’s 19x, but its higher breakeven price makes it riskier in a low-price environment. Investors betting on a recovery must weigh Chevron’s $12.23 EPS growth target by 2026 against the very real threat of prolonged underperformance. Until oil prices stabilize, Chevron’s earnings—and its stock—will remain in limbo.