Chevron second-quarter earnings took a substantial hit due to low oil prices and a loss on its acquisition of Hess Corporation. The oil major’s net income declined 43% to $2.49 billion, or $1.45 per share, from $4.43 billion, or $2.43 per share, in the same period last year.

Chevron reported adjusted earnings of $1.77 per share, surpassing analyst expectations, alongside revenue of $44.8 billion, which also exceeded forecasts. The company achieved record production levels, particularly in the Permian Basin, where output reached one million barrels of oil equivalent per day for the first time. Despite a 10% decline in crude oil prices, Chevron's free cash flow increased by 15%, attributed to higher production of high-margin barrels.

Chevron's acquisition of Hess has been finalized following the resolution of litigation, with the company expecting significant synergies and additional contributions from Hess's Guyana reserves. The integration is progressing ahead of schedule, with $1 billion in synergies anticipated by year-end. Chevron emphasized the security of its dividends and share buybacks, projecting continued growth in free cash flow through 2026.

Chevron profit hit by low crude oil prices, loss from Hess acquisition

All right. Let me tell you about some breaking news right now. We've got second quarter results that are just out from Chevron. Earnings came in at $1.77 a share on an adjusted basis. That's better than the $1.70 that the street was looking for. Revenue also came in better than expected, $44.8 billion versus $43.8 billion. Lots of other metrics that are in here that came in above estimates as well, including net production. They set worldwide and U.S. record levels that they've seen on this for the Permian basis, for example. Production hit a million barrels of oil equivalent a day for the first time ever. I spoke with Mike Wirth. He is the CEO of Chevron about some of these things. And he said a decade ago, they were barely at 100,000 a day in the Permian. So you're talking about tenfold increase with these things. Big point here is two things. They beat on expectations, and also free cash flow was up by 15% despite crude oil prices coming down by 10%. You are going to see lower earnings from all of these oil companies because crude oil prices have come down so much. But he was pointing to the efficiencies that they have with this. He said the free cash flow was up because of stronger production. Growth is in the high margin barrels in places like the Permian, too. So that really drives free cash flow. In fact, he says over the next two years, between 2024 to 2026, you are going to see free cash flow grow by $12.5 billion they're now projecting, $8.5 billion in 2024 to $21 billion in 2026. And he said, as a result, here's the key for investors. For dividends and share buybacks, it means that they are very secure, in Mike Wirth's words. He said that they're buying back somewhere between $10 and $20 billion a year. And they're also talking about what they're seeing with Hess. It's been two weeks since that deal was finalized because of the litigation that was kind of brought out of the way they won on that court case. Hess is now going to be saying, they say, Hess is going to kick in about $1.5 billion additionally from Guyana with the big reserves there. And they're also going to see about $1.5 billion in synergies from Hess, also pointed to some new chemical facilities in the Middle East that are going to be coming on that he thinks will help them over the next year or two. And when he talked about what happened with Hess, there was a long time that came up. That deal was announced back in October of 2023. It was slowed down by the mediation that was brought by ExxonMobil over that Guyana share. But he said, since they've announced it in October 2023, they've repurchased about half of the shares that they had to issue to do this. It was a share conversion for this, to buy this. So it made it a much better deal than they saw originally. He said, this was a very good deal. It's an even better deal now. He said, since they announced this, they are going to see a billion dollars in synergies by the end of the year. And that's half the time that they originally said, because originally they said it would take a year to get to that. He said they had an asset sale of a few hundred million dollars for the United States. And again, said they were able to hit the ground running because this took so long. They were able to hit the ground running in the first two weeks. So I asked him, was he grateful to ExxonMobil for slowing the process down, for making them be able to get all their ducks in a row? It was a long pause. He said no comment. And then we both laughed. Obviously, there were a lot of complications that came out of that. It was not fun. But they are going to be working together on the ground in Guyana. He pointed out that they have a few hundred people there from Hess who have been there this entire time. He said they're going to be keeping those people there, but just pushing him about the partnership, whether they do it. He said, partnership is one of Chevron's core values. They work with people. Their on-the-ground relationships will be fine. Hess had a couple hundred people working on the ground. But you can tell there's definitely some tension there, and it has strained relationships to some extent. He talked about how when Rex Tillerson was still the CEO of ExxonMobil, before they found the big Guyana reserve, they'd been working together on that with Hess. He said John Hess insisted that they drill another well. Rex Tillerson thought they were talking about Equatorial Guinea, a different country, didn't even know what country they were in. Great. And he became secretary of state. Awesome. Because he insisted on them doing that. Guinea, Guyana, found their somewhere. They found those huge reserves. But he did say their people work very well on the ground together, and they expect that great cooperation to continue, and for them to continue to work well together. Now, we're going to be speaking with Darren Woods from ExxonMobil later on this morning. We'll get a chance. Mike Wirth is going to be coming up today in an exclusive on Squawk on the Street. We'll get the chance to talk to Darren Woods. But again, a long partnership that they've had on the ground, and both sides will say that they expect that good relationship on the ground to continue.

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Breakdown