Chevron Stock Rises After Earnings. These Concerns Remain.

Chevron entered earnings season with strong momentum. (Brandon Bell/Getty Images)

Chevron second quarter earnings results show that the company is reaping the financial rewards of years of investment in large projects — from the Permian Basin in Texas and New Mexico to a huge oil field in Kazakhstan.

Production hit a record in the quarter, with Permian output rising above the company’s goal of 1 million barrels per day. The company even added $2.5 billion to its target for 2026 free cash because of all of this growth.

But shareholders had a tepid response, lifting shares just 0.4% in early trading.

The problem for Chevron is that its growth initiatives are coming at a time when oil prices are relatively weak, and are expected to fall further in the months ahead. That is weighing on earnings.

Adjusted earnings of $1.77 a share were down from $2.55 last year, though they beat the consensus estimate of $1.73 among analysts polled by FactSet. Revenue of $44.82 billion topped expectations for $43.87 billion.

Chevron has also slowed its pace of share buybacks, repurchasing $2.6 billion in the quarter, down from $3.9 billion in the first quarter. CFO Eimear Bonner said in an interview that the company is still on track to buy back between $10 and $20 billion worth of shares this year, as it previously told shareholders. The company is unlikely to reconsider its current pace until an investor conference in November.

Chevron entered earnings season with strong momentum.

The company just closed its acquisition of oil producer Hess, and got permission from the Trump administration to resume operations in Venezuela. Shares are up about 5% in the past month.

Finalizing the Hess deal was no easy feat. It had been in limbo for nearly two years, because Exxon Mobil had said that it should have a right to buy Hess’ stake in a major oil project in Guyana that Exxon operates. Chevron won an arbitration case over that issue just a few weeks ago, and completed the acquisition.

Hess’ stake in the Guyana project fills a void for Chevron. Investors had been worried that Chevron doesn’t have enough growth opportunities around the world, compared with Exxon. The Guyana project is expected to produce hundreds of thousands of barrels’ worth of oil every day for the rest of the decade and beyond.

Write to Avi Salzman at avi.salzman@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com