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Chevron: Fasten Your Seat Belts

Jul. 09, 2017 2:54 PM ETChevron Corporation (CVX)28 Comments
Sarfaraz A. Khan profile picture
Sarfaraz A. Khan


  • Chevron has been successful in improving its revenues, earnings and cash flows.
  • But the weakness in oil prices threatens to derail Chevron's turnaround.
  • If prices stay weak, then the company could face a large cash flow deficit.

Chevron (NYSE:CVX) was hit particularly hard in the downturn, but it has been heading in the right direction. The San Ramon, California-based company managed to consistently grow revenues while significantly improving its cash flows. But the turnaround of the second-largest US oil company could lose momentum, thanks to the latest dip in oil prices. There will likely be pain ahead for investors in the short term.

Chevron's production profile is more liquids linked than that of its peers Exxon Mobil (XOM), Royal Dutch Shell (RDS.A, RDS.B) and BP (BP). In 1Q17, for instance, Chevron's total production was 64% liquids. Therefore, it was hit particularly hard by the slump in oil prices. But the company has been slowly making a comeback, driven in large part by the improvement in oil prices.

In 1Q17, Chevron managed to increase its revenues for the fourth time in a row on a sequential basis to $31.36 billion. It also swung to a profit of $1.42 per share from a loss of $0.39 per share in the year-ago period. Its cash flows from operations also surged to $3.88 billion from $1.14 billion a year earlier. With higher cash flows and lower CapEx, the company ended the quarter with positive free cash flows of $564 million. That improvement came as the average price of crude oil gradually improved to $51.77 a barrel in 1Q17 from as low as $33.18 in 1Q16.







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However, oil prices have come under pressure in

This article was written by

Sarfaraz A. Khan profile picture
Hey there, I'm Sarfaraz A. Khan - a seasoned financial writer and investor with a passion for uncovering hidden gems. I have a deep understanding of fundamental analysis and I specialize in writing about mid-cap and small-cap companies that are poised for significant growth. My investment philosophy is heavily influenced by the strategies of legendary investors like Warren Buffett and Benjamin Graham. I look for investment opportunities in companies that have strong fundamentals and can grow substantially over the long-term. I'm not afraid to venture into other areas of the market either. While I primarily write about mid and small-cap stocks, I also delve into ETFs and economic trends occasionally. I always aim to provide a balanced view and discuss risk factors in my articles so investors can make better decisions. Although I've been away from Seeking Alpha for a while, I'm excited to get back to writing and sharing my expertise with the community. Moving forward, you can expect to see two to three articles a week from me. When I'm not analyzing stocks or writing about finance, I enjoy reading about history, religion, science, economy, and following the latest developments in the energy and technology sectors.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I own shares of funds that may hold a long position in Chevron, Exxon Mobil and Royal Dutch Shell.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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