CVX Ups Its FY2024 Capex Plan: In December, CVX disclosed its FY2024 capex plan. Including the capex plan for PDC Energy, which HES acquired in August, its total capex is expected to lie between $19 billion and $22 billion. The majority of this will come from organic capex. This means its organic capex is expected to rise by 34% in FY2024 compared to FY2022. The company estimates that upstream will account for most of the capex (87%). The Permian Basin development alone will consume $5 billion, while the plans for the Gulf of Mexico will require 25% of its upstream budget. The company also plans to allocate $2 billion in lower carbon capex to lower carbon intensity and renewable expansion projects.
PDC is not the only company to join CVX’s kitty. In October, CVX announced an agreement to acquire Hess Corporation in a $53 billion deal. The acquisition will diversify its assets in Guyana and Bakken, alongside CVX’s DJ and Permian basin operations. The acquisition is expected to be completed in 1H 2024.
Q3 Performance Took A Hit, But Drilling Can Improve: Quarter-over-quarter, CVX’s adjusted earnings were nearly unchanged in Q3. Year-over-year, however, its segments witnessed a steep decline in earnings. Earnings in the Upstream segment dropped by 38% in Q3 2023 while marginally exceeding the fall in the Downstream segment (33% down). Its total revenues decreased by 18% in Q3 2023 compared to a year ago.
The primary drivers for the inferior performance in Q3 were lower price realizations in upstream and lower margins on refined products. Its total production was up by 4%, aided by acquiring PDC Energy. Despite the adverse developments, its management sees “more feet drilled per rig and more completion feet than we had planned,” particularly from its PDC operations.
Cash Flows To Lose More Steam: CVX’s cash flow from operations dipped (38% down) in 9M 2023 compared to a year ago, due primarily to lower revenues during this period. As a result, its FCF decreased by 60% in 9M 2023. Its debt-to-equity (0.12x) is comfortable due to strong shareholders’ equity. The company has lowered its cash flow from operation guidance to $4 billion in FY2024 from the previous $5 billion (assuming lower crude oil price).
