Permian development continues to be a priority for the company contributing to the uninterrupted display of strong operational and financial results.
The Permian basin was mentioned twenty-two times during Chevron’s earnings conference call, alluding to the importance it represents to the company for current and future development. The company has a prominent position in the basin, and 2022 volumes were up sixteen percent. The basin contributed a large portion to achieving a 2022 reserve replacement ratio of nearly 100% and Chevron has concrete plans to continue developing the basin in 2023. As explained by Mike Wirth, CEO of Chevron: “We [..] are re-optimizing some of our development plans to factor in some of the things we continue to learn relative to interactions between wells and benches, how we space laterals and do single or multi-bench developments. Our revised plan will have some deeper targets, a few more rig moves, and a few more single bench developments…”
Chevron’s fourth-quarter 2022 results were financially strong and displayed concrete improvements over the comparable quarter of 2021. The company reported its strongest operating cash flow in history over the full-year period, even though its production was down by 3%. Almost 7% of the decline in production was caused by the end of Chevron’s concessions with the nations of Indonesia and Thailand. The company increased its production by almost 4% year-over-year in the U.S. primarily in the Permian basin, which allows it to make up for the decline in other geographies. According to TGS Well Performance dataset, Chevron achieved their stated goal of 700,000 to 750,000 boepd in the Permian Basin.
In addition to strong operating results, the company increased its quarterly dividend per share an additional 6 percent, bringing it to $1.51 per share, above consensus expectations. The dividend rise puts the company on track to increase its annual per-share dividend for the 36th straight year, helping shareholders offset the effect of inflation and ensuring that the purchasing power of the dividend is kept.
Finally, Chevron’s current debt-to-equity ratio compares very favorably with offset operators. As of December 2022, Chevron had a net debt of $8.210 billion compared to $159.627 billion of shareholders’ equity. This results in a net debt-to-equity ratio of only 0.05. Other peers similar to Chevron have debt-to-equity ratios ranging from 0.08 to 0.71. Debt-to-equity ratio exposes the proportion to which the company is financing its operations with debt instead of operating cash flows. In this regard, Chevron is, by far, one of the pack leaders and can easily finance future projects and return cash to shareholders.
