FY25 Adjusted FCF $20B, $14B+ Repurchases Including Hess Shares Acquired at a Discount, $3–4B Cost Target by 2026, 39th Consecutive Dividend Hike — Maintaining Outperform

Rating Action

Maintaining Outperform. The Q4 print is the operational follow-through to the Investor Day reset. Three thesis-relevant elements drove the maintain decision rather than a further upgrade: (1) the Investor Day on November 12 delivered the framework re-baseline (capital cadence, 2030 framework with >10% adj FCF/EPS growth + 3% ROCE improvement at $70 Brent) that we wrote up at initiation as the principal forward catalyst; (2) the cost program acceleration to $3–4B by 2026 from the prior $2–3B is a material upward revision to the through-cycle margin framework; (3) the buyback range was formalized at $2.5–3B per quarter with the Q4 print at the high end — consistent with our Q2 framing of “flat-to-modestly-up” vs the deal-announcement-era $2.5B step-up. The TCO power-distribution issue is a mechanical operational matter without thesis impact since the FY26 TCO FCF guide held. We continue to underwrite a 12-month total return above the S&P 500 with the 2030 framework as the through-cycle anchor.

Results vs. Consensus

Q4 prints lower than Q3 on commodity-price weakness in Upstream and timing-driven softness in Downstream. The FY25 composition is the more thesis-relevant frame: record production, +35% Y/Y adjusted FCF on ~15% lower crude, and $14B+ in total repurchases including the Hess-share-discount benefit.

Segment / Geographic Performance

Upstream — FY25 Record Year; Hess Inside the Numbers Full Quarter

• Permian: above 1 mboed for three consecutive quarters. Bonner directly framed the Permian as the cleanest validation of the plateau-with-cash-discipline strategy: $3.5B Permian capex achieved, drilling rig efficiency more than doubled since 2022, and the plateau strategy is being extended across the consolidated shale-and-tight portfolio (DJ, Bakken, Argentina). The basin-wide US shale slowdown discussion is largely an externality — CVX’s portfolio approach is structurally insulated.
• TCO / Tengiz: FGP completed; power issue temporary. The Future Growth Project completed at 260 kboed; Q4 reflected the pit-stop maintenance that Bonner had pre-staged in Q3. The early-January power-distribution issue resulted in a temporary recycle, with production resumption underway and full-field capacity expected within February. The retray work done during the late-2025 turnaround is expected to enable additional debottlenecking once full-capacity run time is logged. FY26 Chevron-share TCO FCF guide of $6B at $70 Brent unchanged.
• Gulf of America: Anchor, Whale, Ballymore ramping; on track for 300 kboed in 2026. Wirth reiterated the 300 kboed Gulf platform target for 2026. The post-Hess leasehold (largest in the Gulf, 80% adjacent or within tieback range) extends the multi-decade tieback economics.
• Bakken: 200 kboed plateau; portfolio role becoming clearer. Wirth’s Q4 commentary on the Bakken was notably more constructive than the Q3 framing — the asset is now performing in line with the 200 kboed plateau target with rig count cut from 4 to 3 (similar drilling output), longer laterals scaling, and chemical-recovery technology being trialed. Bonner’s commentary that the chemical surfactant program is being extended from the Permian (40% of new wells in H1 2025 to ~85% in 2026, target 100% in 2027) into the Bakken and DJ sets the multi-quarter recovery-uplift narrative.
• Argentina / Vaca Muerta: Continued to benefit from the consolidated shale-and-tight reporting structure; Wirth re-framed Argentina as a multi-year option with Milei-administration signposts continuing to evolve favorably.
• Eastern Mediterranean (Tamar, Leviathan, Aphrodite/Cyprus): Leviathan reached FID for the further capacity expansion (gross capacity to ~2.1 Bcf/d by end-decade); Tamar optimization project start-up in progress (gross capacity to ~1.6 Bcf/d). Aphrodite has now entered FEED. The combined projects are expected to roughly double earnings and free cash flow from the EM business by 2030 vs. current.
• Australia LNG: Reliability narrative held with Gorgon and Wheatstone running at full rates.
• Venezuela: Wirth’s Q4 framing was unusually expansive. Operations have continued uninterrupted; gross production now ~250 kboed, up from the 200 kboed Q3 framing; the next 18–24 months could deliver up to ~50% incremental production growth subject to additional US authorizations. Venezuelan crude into Pascagoula at ~50 kbd, with system capacity to take additional volumes both at Pascagoula and El Segundo. The narrative shifted materially from “debt recovery mode” toward “optionality on a sizable scale” in Wirth’s framing — though he was careful to note that fiscal terms and stability remain the gating issues.
• Stabroek (Guyana): Yellowtail online + Hammerhead at FID continue the pace of the FPSO sequencing. The 4th and 5th FPSOs are the principal driver of the +$2.5B Hess incremental in our FY26 framework.
• Middle East (Iraq, Libya): Wirth disclosed a recent MOU in Libya. The narrative shifted from underweight-by-design (less competitive contract terms historically) toward selective re-engagement on the back of more competitive fiscal terms emerging post-Trump-administration regional engagement.

Downstream — FY25 Highest US Refinery Throughput in Two Decades

• Q4 Adjusted Downstream lower Q/Q on weaker Chemicals earnings and lower Refining volumes, despite stronger refining margins. The FY25 frame is more positive: highest US refinery throughput in two decades.
• El Segundo fire (October 2025): Operations have continued under a Q4 watch-item lens; details were not re-quantified on the Q4 call beyond the Q3 framing.
• California refining context: Wirth re-framed the California position as “competitive scale + complexity + retail brand” with the policy-driven local-market tightening providing margin support against a structurally short market. Two CA refineries shut down in the second half of 2025 take capacity out of the system; CVX’s integrated position remains advantaged.
• CPChem: Tough cycle conditions held through Q4. The two world-scale facilities with QE come online next year — ~20% IRR expectations — with the long-term petrochemical demand growth narrative reaffirmed.
• Pascagoula: Running ~50 kbd of Venezuelan crude with capacity to take more.

All Other / Corporate

• Other-segment higher-interest, corporate-charge headwinds consistent with the Q3 framing.
• Inorganic CapEx in Q4 was related to lease acquisitions and new-energies investments.
• Reserve replacement: Hess-driven plus organic adds. Bonner walked the reserves disclosure: triple-R led the peer group on 5- and 10-year basis. Reserve life is structurally lower than 5–6 years ago, but the portfolio-design framework (more facility-limited assets at TCO/Gorgon/Wheatstone, plateau-managed shale-and-tight) makes triple-R a less reliable single metric for portfolio quality.
• Pension settlement: $128M Q4 charge on retirement-plan curtailment costs.

Key Topics & Management Commentary

The Cost Program — $3–4B by 2026 Is the Material Upgrade

Bonner framed the cost-program acceleration directly:

“Last year, we launched our structural cost reduction program as part of our continued commitment to cost discipline. Execution has exceeded expectations, $1,500,000,000 delivered in 2025, and $2,000,000,000 captured in the annual run rate. ... we expect this momentum to continue as we aim to deliver on our expanded target of $3,000,000,000 to $4,000,000,000 by 2026. With more than 60% of savings coming from durable efficiency gains.”
— Eimear Bonner, CFO

The thesis read-through: the “more than 60% durable efficiency” framing is the cleanest indication that the cost program is structural, not one-time. The expansion to $3–4B from the prior $2–3B by end-2026 is a $1B step-up in the through-cycle expense base — meaningful at a $20B FCF run-rate.

FY25 Closes — A Year of Execution; FY26 Sets Up From a Position of Strength

Wirth’s FY25 closing framing was unusually direct:

“2025 was a year of execution. We set records, started up major projects, and strengthened our portfolio. ... We’re entering 2026 from a position of strength, and will continue building on our momentum in the years ahead.”
— Mike Wirth, Chairman and CEO

The FY25 record list is the cleanest mechanical confirmation of the initiation thesis: FGP at TCO complete, Ballymore + Whale start-ups in the Gulf, anchor ramping, Permian at 1 mboed, Hess closed, US refinery throughput record. The post-Hess portfolio is operating against the framework we wrote up at Q2.

Capital Returns — $14B+ FY25 Buybacks; 39th Annual Dividend Hike; $50 Brent Breakeven

Bonner closed with the through-cycle resilience framing:

“Our diversified portfolio has a dividend and CapEx breakeven below $50 Brent, and a deep opportunity queue with lower execution risk. ... Over the last four years, we’ve returned more than $100,000,000,000 in dividends and buybacks. ... Today, we announced a 4% increase in the quarterly dividend, in line with our top financial priority.”
— Eimear Bonner, CFO

The 39-year dividend track record + sub-$50 breakeven + 1x net-debt-coverage ratio is the cleanest framing of the through-cycle capital-return discipline we wrote up at initiation. The 4% Q1 2026 dividend hike compounds at the Q2-framed pace.

Venezuela — Optionality Becoming More Concrete

Wirth’s Q4 framing was expansive enough to warrant separate emphasis. The current state: 250 kboed gross production (up from 200 in Q3), self-funded ventures continuing to pay down legacy debt and meet operating-cost obligations, and up to ~50% incremental production growth potential over the next 18–24 months subject to US authorizations. CVX has been in Venezuela for 100+ years and is the most positioned major to scale once fiscal terms stabilize. Wirth was careful to flag that the November-passed Venezuelan hydrocarbon law is still being assessed:

“We see the potential to further grow production volumes by up to 50% over the next eighteen to twenty-four months. ... There is significant potential in our assets, and in the country.”
— Mike Wirth, Chairman and CEO

TCO Power-Distribution Issue — Mechanical, Not Structural

Wirth walked the issue with operational clarity:

“The team proactively suspended production at the facility when an issue was identified in the power system. ... Production has been resumed at the Korolev field. ... full field production capacity is not far away.”
— Mike Wirth, Chairman and CEO

The thesis-relevant disclosure: the FY26 Chevron-share TCO FCF guide of $6B at $70 Brent is unchanged. The maintenance optimization (timing) plus the late-2025 retray work create both near-term operational headwinds and longer-term debottlenecking upside — net-net consistent with our base case.

Bakken — Performing; Strategic Review Continues but Tone Improves

Wirth’s Q4 framing on the Bakken was directional:

“We’re pleased with the Bakken. We’re applying best practices ... we’ve already optimized our development program ... so similar to the way you’ve heard us talk about the DJ and the Permian, we think we can drive a lot of asset productivity efficiency technology and free cash flow growth in this asset as well.”
— Mike Wirth, Chairman and CEO

The DJ analogy he drew explicitly twice (Q3 + Q4) increasingly suggests the Bakken stays core. Bonner’s chemical-surfactant program details (40% of new Permian wells treated H1 2025; ~85% in 2026; target 100% in 2027; testing in Bakken Q4 2025; pilots in DJ; ~20% improvement in 10-month cumulative recovery, ~10% lifetime uplift; Bakken first-treatment results expected in coming months) is the cleanest near-term value-creation lever for the Bakken and DJ.

Eastern Mediterranean — FID Reached at Leviathan, Aphrodite Enters FEED

Wirth’s framing positions the EM as a multi-decade growth corridor:

“Combined with a near-term expansion, gross capacity is anticipated to reach roughly 2,100,000,000 cubic feet per day at the end of the decade. Contributing to a doubling of current earnings and free cash flow.”
— Mike Wirth, Chairman and CEO

The 40 TCF gross resource is comparable in scale to CVX’s Australian LNG portfolio. The combined Tamar + Leviathan + Aphrodite pipeline is a 2030+ thesis lever that extends the cash-flow framework beyond the 2026 incremental window.

M&A — Equity Hedges Long-Cycle Risk; Cash for Smaller Deals

Wirth’s answer to the Kazakhstan-asset M&A question (TD Cowen) was framework-relevant:

“On large-scale M&A in our sector, where you’re gonna have a long time between deal signing and close. I e, a deal we just closed after a pretty long cycle. Using equity hedges commodity price risk on both sides of the transaction. ... Smaller deals that close faster ... cash is preferable.”
— Mike Wirth, Chairman and CEO

This is a portfolio-allocation framing, not a deal-pipeline disclosure. The Hess close, with the Hess shares acquired at a discount during the delay window (worth >50% of the issued shares at $10/share advantage), is the cleanest demonstration that the equity-funded structure for large deals optimized at the close.

Guidance / Outlook

Analyst Q&A — Notable Exchanges

The Q4 Q&A clustered around (i) TCO operational status + concession, (ii) Venezuela optionality, (iii) Eastern Mediterranean growth, (iv) cost program + organizational efficiency, (v) Bakken portfolio role, (vi) chemicals + LNG strategy, and (vii) M&A balance-sheet posture. Notable threads:

• Arun Jayaram (JPMorgan) opened on TCO. Wirth’s detailed walk of the power-distribution issue (root-cause investigation underway, Korolev field back online, ramp-up in progress) plus the maintenance optimization framework + late-2025 retray work positions FY26 TCO as in-line-or-better despite the early-Q1 disruption.
• Neil Mehta (Goldman Sachs) probed Venezuela. Wirth’s most expansive Venezuela disclosure to date — 250 kboed gross production, +200 kbd growth since 2022, +50% potential over the next 18–24 months — reframes Venezuela as a meaningful 2027+ optionality lever rather than a debt-recovery footnote.
• Doug Leggate (Wolfe Research) asked the Tengiz/OPEC+ compliance question. Wirth’s historical-pattern framing — that low-fiscal-attractiveness barrels tend to bear restrictions, not TCO — is the cleanest available read on the OPEC+ compensation-cut exposure.
• Ryan Todd (Piper Sandler) drew the Eastern Mediterranean update. Wirth’s 2030 framework — capacity-doubling at Tamar + Leviathan, FEED at Aphrodite, exploration in Egypt — is the cleanest disclosure on the EM as an Investor-Day-validated multi-year corridor.
• Devin McDermott (Morgan Stanley) probed the cost program in detail. Bonner’s “hit the ground running” framing on the new operating model + AI-enabled supply chain + production-chemical optimization in the consolidated shale-and-tight portfolio is the most concrete disclosure on how the $3–4B target by 2026 is being delivered.
• Sam Margolin (Wells Fargo) asked the Permian capital-efficiency question. Bonner’s “drilling rig efficiency more than doubled since 2022” data point is the cleanest validation of the cost-curve descent.
• Paul Cheng (Scotiabank) asked about Iraq + Libya + LNG portfolio scale. Wirth’s framing — selective re-engagement post-Trump-admin regional dynamics, with discipline on terms — positions Middle East as a managed-optionality lever, not a portfolio-wide pivot.
• Stephen Richardson (Evercore ISI) asked the through-cycle leverage / discipline question. Wirth’s “continually raising the dividend, steadily buying shares back through the cycle, reinvest in the business to strengthen it over time” framing reiterates the playbook.
• Biraj Borkhataria (RBC) probed portfolio concentration. Wirth’s “run big things big” framing — large positions, scale, technology applicability — is the cleanest portfolio-design statement.
• Manav Gupta (UBS) drew the California-refining + Venezuela-crude tailwinds. CVX has the largest competitive position in CA following the recent shutdowns; capacity to run ~150 kbd Venezuelan crude across Pascagoula + El Segundo is the operational complement.
• Alastair Syme (Citi) probed reserve replacement. Bonner’s framing — triple-R is one metric among many, with the longer-term portfolio quality (5/10-year peer-leading triple-R) the more reliable disclosure — is consistent with the portfolio-design narrative.
• Jean Ann Salisbury (Bank of America) asked about the chemical surfactant program. Bonner’s detailed disclosure — 40% of Permian new wells treated in H1 2025, ~85% in 2026, target 100% in 2027, ~20% improvement in 10-month cumulative recovery, ~10% lifetime uplift, ~300 existing-well treatments showing 5–8% decline reduction, Bakken Q4 first treatments + DJ pilots underway — is the clearest near-term value-creation lever for the consolidated shale-and-tight portfolio.
• Betty Jiang (Barclays) drew the Bakken framing. Wirth’s “pleased with the Bakken” + DJ analogy + chemical-recovery program technology transfer positions the Bakken as performing in line with the 200 kboed plateau target.
• Geoff Jay (Daniel Energy Partners) asked about US Upstream margin expansion. Wirth’s walk of the contributors — high-margin GoA barrels, plateau across the consolidated 1.6 mboed shale-and-tight portfolio, structural cost reductions — is the cleanest framing of the multi-lever margin story.
• Bob Brackett (Bernstein) probed Venezuelan heavy crude absorption capacity in the US. Wirth’s “markets are wonderful things” reply with redistribution dynamics is consistent with the macro framing.
• Phil Jungwirth (BMO) drew the CPChem ownership / petrochemicals question. Wirth’s “CPChem is well-run” framing, with longer-term opportunism on increased exposure, plus the GS Caltex aromatics position, frames petrochemicals as a managed growth aspiration.
• Paul Sankey (Sankey Research) asked about CPC loading and the power outage. Wirth’s “mechanical issue” framing on TCO power + the loading-berth status (back to two of three single-point moorings, third later in the year) reiterates the short-duration nature of the disruption.
• Jason Gabelman (TD Cowen) asked about M&A funding (cash vs. equity) and the debt-to-cash-flow framework shift. Wirth’s equity-hedges-cycle-risk framing on large M&A and Bonner’s rating-agency-aligned debt-metric framing is the cleanest portfolio-allocation framework disclosure.

What They’re NOT Saying

• No quantified post-Investor-Day buyback step-change beyond the $2.5–3B range. The Q4 print at $3B is at the high end of guide and consistent with our Q2-framed “flat-to-modestly-up” thesis. The deal-announcement-era $2.5B step-up commitment continues to be unquantified beyond the formal range.
• El Segundo configuration / downtime cost not disclosed. Q4 framing held the Q3 line on the fire impact — we treat this as a manageable but unquantified Q4 watch-item.
• TCO concession negotiations: no quarterly updates. Wirth held the Q3 line that technical and commercial teams have engaged but quarterly progress reporting will not be provided. This is multi-year work.
• Bakken long-term role: tone improved, but optionality preserved. The DJ analogy used for the second consecutive quarter increasingly signals the Bakken stays core — but no commitment was made.
• FY26 capital allocation specifics: No fully decomposed CapEx walk by segment was offered. The capex envelope ($18–19B per the Q1 2026 disclosure framework, in line with Investor Day) is the operative range.
• Venezuelan asset-swap details (post-quarter): The PDVSA asset swap announced two weeks before the Q1 2026 call (Ayacucho 8 + PetroIndependencia stake increase to 49%) was a Q1 2026 event — not yet reflected in Q4 disclosures but consistent with the Wirth framing of expanding the Venezuelan optionality.
• Pension-settlement charges: not pre-flagged at investor day. The $128M Q4 charge was a one-time settlement; we do not expect recurrence in 2026.

Market Reaction

The print landed BMO on January 30 with adjusted EPS $1.52 against a $1.74 cons estimate — a Q4 EPS miss on commodity-price weakness in Upstream and timing-driven softness in Downstream/Chemicals. The principal positive offsets: the cost-program acceleration to $3–4B by 2026 (from $2–3B), the $14B+ buyback for FY25 including the Hess-share-discount benefit, the 4% dividend hike (39th annual increase), and the formal FY26 production-growth guide of 7–10%. Initial reaction was mixed: the Q4 EPS miss weighed on the print, but the structural cost-program upgrade and the FY26 framework reaffirmation compressed the negative selling pressure. Trading focus moved to the FY26 set-up given the TCO power-distribution issue (early-Q1) introduced near-term operational uncertainty even as the FY26 guide held. Net read: the print is consistent with the Investor Day reset framework and confirms the through-cycle operating-leverage trajectory; the commodity-price softness is mechanical and the cost-program upgrade is structural.

Street Perspective

The bull case being articulated on the Street post-Q4 converges on three planks: (1) the cost-program acceleration to $3–4B by 2026 (with >60% durable efficiency framing) is a $1B step-up to the through-cycle expense base — meaningful at a $20B FCF run-rate; (2) the $14B+ FY25 buyback (including Hess-share discount), the 39th consecutive dividend hike, and the formal $2.5–3B quarterly buyback range collectively confirm the through-cycle distribution discipline at the level we wrote up at initiation; (3) the FY26 production-growth guide of 7–10%, with the $6B TCO Chevron-share FCF guide held, confirms the FY26 framework reset at Investor Day is on track despite the TCO power-distribution issue.

The bear case being constructed on the Street centers on: (1) Q4 adjusted EPS missed against consensus on commodity-price weakness; the absolute earnings level continues to compress against 2024; (2) the TCO power-distribution issue introduced near-term operational uncertainty even as the FY26 guide held the line — investors will want to see February ramp confirmation; (3) the cost-program upgrade is welcome but the “more than 60% durable” framing leaves some uncertainty on the structural-vs-cyclical decomposition; (4) the El Segundo refinery fire cost has not been fully quantified; (5) the 2030 framework is a $70 Brent assumption — downside crude-price scenarios stress the model.

Our read sides with the bull framing on (1) and (3) and treats (2) as a Q1 2026 watch-item that the Q1 print should resolve favorably. The cost-program upgrade is the most important new thesis input from this quarter. The Investor Day framework remains the through-cycle anchor; the Q4 print is consistent with that framework even with the commodity-price weakness compressing the headline.

Model Implications

• FY25 EPS: Q4 $1.52 = FY25 adjusted EPS of $6.99 (Q1 $1.85 + Q2 $1.77 + Q3 $1.85 + Q4 $1.52), in line with the lower end of our Q3 framework.
• FY26 EPS: Held at $9.00–10.50 framework with the cost-program upgrade compounding through-cycle margin. The 2030 framework (>10% adj FCF/EPS growth + 3% ROCE improvement at $70 Brent) anchors the multi-year setup.
• FY26 Production: 7–10% growth = ~4.2–4.3 mboed average pro-forma. We hold ~4.2 mboed for FY26 base case.
• FY26 CapEx: Organic ~$18–19B per the framework; Q1 2026 disclosure will refine.
• FY26 Capital Return: $2.5–3B quarterly buyback formalized; FY26 ~$22–24B distributions tracking. Modest step-up vs FY25 in our base case but consistent with the formal range.
• FY26 Cost Program: $3–4B target by year-end, with $2B run-rate already captured. We model the FY26 step at the upper end of the bracket given the “more than 60% durable” framing.
• FCF: FY25 adjusted FCF $20B (+35% Y/Y on ~15% lower crude); FY26 implied $30–33B at base-case crude + cost-program tailwind, below the prior $32–35B framework on more conservative crude assumption.
• Net Debt Coverage: 1.0x at year-end — balance sheet provides genuine optionality through any cycle.
• TCO FCF: $6B Chevron-share at $70 Brent reaffirmed; February ramp confirmation is the principal Q1 2026 watch-item.

Thesis Scorecard

Overall: Four bull pillars confirmed plus two new (cost-program upgrade; through-cycle dividend + breakeven framing). The principal latent buyback-cadence concern is now resolved into the formal $2.5–3B quarterly range, consistent with the Q2-framed thesis. Two near-term operational watch-items (El Segundo fire residual + TCO Q1 ramp) are mechanical, not structural. The 2030 framework provides the through-cycle anchor.

Action: Maintaining Outperform. The Q4 print is the operational follow-through to the Investor Day reset. The cost-program upgrade is the most important new thesis input from this quarter and a $1B step-up to the through-cycle expense base. The 39th consecutive dividend hike and the formal $2.5–3B quarterly buyback range collectively confirm the through-cycle capital-return discipline. The TCO power-distribution issue is a Q1 2026 watch-item but not a thesis-relevant event — the FY26 TCO FCF guide held the line.

Net: FY25 closed with record adjusted FCF of $20B, $14B+ in repurchases, the 39th consecutive dividend hike, and a structural cost program now targeting $3–4B by 2026. Maintaining Outperform.