Chevron Gushes More Profits; Is it Time for Investors to Buy?

Key Points

• Rising oil prices are contributing to another strong quarter of near-record profits for Chevron. 
• The company is increasing production.  
• Dividend investors have a couple of weeks to capture the company's robust dividend.  
• With the price of crude oil down and CVX stock near an all-time high, traders may want to wait for a better price. 

Chevron (NYSE:CVX) is up about 1.5% on the day that the company reported another strong quarter. The oil company delivered earnings per share of $5.56. This beat expectations by 34 cents and was just a little lower than the record of $5.82 EPS the company posted in the prior quarter. On the revenue side, the company generated $64 billion in sales that was nearly double the $44.7 billion Chevron recorded in the prior year’s quarter.  

The catalyst for the strong earnings was the higher oil prices that occurred at the end of summer. However, while the fundamentals of supply and demand will always have an effect on oil prices, it’s a little bit of an over-simplification in this case. That’s because Chevron is playing a significant role in shipping liquified natural gas (LNG) to Europe.  

LNG is the byproduct of a process that cools natural gas to a temperature that changes it from a gas to a liquid at 1/600th of its original volume. This lets it be shipped safely and efficiently to its destination. There it is converted back into natural gas and delivered via local pipelines.  

The Company is Increasing Production 

Any time an oil company reports a profit, there are cries that they should produce more. It appears that Chevron is doing just that. Quarterly production in the Permian Basin totaled over 700,000 barrels of oil equivalent per day. According to Chevron that’s a 12% increase from the same quarter in 2021. The company also approved a project that will allow the company to increase its crude oil processing capacity by 15% at its Pasadena, Texas refinery.  

It is worth noting, however, that the company does not intend to increase capital expenditures in the coming year. The company, for now, is sticking to the spending range it set prior to the supply shock set up by Russia’s invasion of Ukraine.  

In a recent interview, chief financial officer Pierre Breber said, “We have a long-term view of where our business is going, and plan well ahead of time...we’re making decisions in the long-term interest of our shareholders and other stakeholders.” 

As evidence of that, cash flow from operations for the first nine months came in at $35.9 billion which was 69% higher than the $21.2 billion it reported in the comparable three quarters of 2021.  

Is CVX Stock a Buy? 

As a long-term investment, Chevron is still one of the best names in the oil and gas industry. And the energy sector will continue to be an intriguing sector in 2023. But when you buy CVX stock is an open question.  

The answer may depend on your objective. If you want to capture the company’s dividend, now is a great time to enter a position. The company announced its quarterly dividend of $1.42 on October 26. Based on the company’s history, the ex-dividend date will be on November 17; so, investors have a couple of weeks to ensure they are shareholders of record.  

However, the recent spike in oil prices has pushed CVX stock to a new 52-week high. That means there may be some profit taking for investors who got in on the stock when oil prices were lower. This is particularly true since oil prices are down about 20% from recent highs. However, a more bullish outlook would point to the fact that the stock is trading for a forward P/E ratio of 9.8X which means the stock is not considered to be overvalued.