Chevron reported disappointing fourth-quarter earnings for 2024, falling below Wall Street estimates as weak refining margins led to significant losses for the first time since 2020. On January 31, 2025, the energy giant announced adjusted earnings per share (EPS) of $2.06, which missed analyst expectations of $2.11. This news prompted shares of Chevron to drop over four percent, reaching a three-week low of $148.68.
The decline can largely be attributed to the decrease in demand across the oil industry. CEO Mike Wirth noted, "It was a quarter in which everything went one way and it was negative," during the post-earnings conference call. The post-pandemic surge of fuel margins, which had previously buoyed the industry, appears to have run its course, leading Wirth to project the downtrend will continue well beyond 2024.
Chevron's refining business registered losses of $248 million, starkly contrasting with profits of $1.15 billion recorded during the same quarter the prior year. Wirth indicated softening margins were not only felt domestically but were also echoed globally, particularly with weak demand for jet fuel exacerbated by diminishing U.S. fuel sales, which fell three percent year-over-year.
Commenting on the results, RBC analysts characterized the earnings as "a relatively soft set of numbers" and expected the disappointing figures would impact how Chevron is perceived against its peers, especially considering its previous strong performance. The analysts highlighted the broader sentiment within the industry where profits from fuel sales had tumbled across both the U.S. and China, which are the world’s largest oil consumers.
Despite the disheartening figures from the refining segment, there was some positive news on the oil production front. Chevron maintained relatively flat oil production, reporting 3.35 million barrels of oil equivalent per day (boepd), marginally down from 3.39 million boepd the previous year. Notably, production from the Permian Basin, which spans portions of Texas and New Mexico, soared 14 percent year-over-year, hitting 992,000 boepd. This brings Chevron closer to its goal of reaching one million boepd within this key area by later this year.
Looking toward the future, Chevron has expressed optimism about its global output, forecasting growth between six to eight percent for 2025 and between three to six percent for 2026, assuming Brent crude prices stabilize around $70 per barrel. Recently, Brent crude has been trading around $77 per barrel, providing cautious optimism for pricing stability.
Chevron also announced plans to increase its quarterly dividend by five percent, raising it to $1.71 per share. The company reaffirmed its commitment to returning value to shareholders, stating it expects to generate $10 billion in free cash flow over the next two years and is set to continue its share buyback programs at $10 billion to $20 billion annually, contingent on market conditions.
Though the results paint a complex picture for Chevron, key challenges remain on the horizon. Their operations continue to face pressure from fluctuated fuel margins and increasing competition within the industry. The company finds itself engaged in high-stakes arbitration with Exxon over its contentious bid for Hess, which owns valuable stakes in Exxon's operations off Guyana, threatening to overshadow their operational outlook.
Wirth’s comments highlight the need for caution as the industry arises from the post-pandemic recovery period. This caution is particularly salient against the backdrop of falling demand and tight refining margins, which are expected to persist well through 2025.
Industry analysts and investors will be keeping their eyes on how Chevron navigates these challenges and whether they can sustain profitability. While recent earnings may serve as cause for concern, the planned growth initiatives and commitment to shareholder returns may provide pathways for recovery and stability as market conditions evolve.
Overall, Chevron’s fourth-quarter report signifies the complex dynamics of the oil market, highlighting the shifts from previous high-demand periods to the uncertainties plaguing the sector now.