Chevron - $CVX.US

What’s Chevron Business Model?

Chevron Corporation is an integrated energy company with operations in countries located around the world. The Company produces and transports crude oil and natural gas. Chevron also refines, markets, and distributes fuels, as well as is involved in chemical and mining operations, power generation, and energy services.

What Chevron is doing in more details?

Chevron has earned its stripes as the #2 integrated oil company in the US, behind Exxon Mobil. Its global operations explore for and produce oil and oil equivalents, refines them into various fuels and other end products, and sells them through gas stations, airport fuel depots, and industrial channels.

Chevron boasts approximately11.4 billion barrels of proved reserves, produces about 3.1 million barrels of oil per day, and has refining capacity for nearly 1.7million barrels per day.

The company sells refined products branded under the Chevron, Texaco, and Caltex names through approximately 7,900 gas stations in the US and around 5,100 outside the US.

Where Chevron is Operating?

Chevron’s operations are grouped into two business segments: Downstream and Upstream.

Downstream operations (more than 75% of revenue) include the refining of crude oil into petroleum products; marketing oil and refined products; transporting products by pipeline, ship, truck, and rail; the making and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.

Also reporting results as part of Downstream are transportation services (pipelines, LNG ships, etc.) and Chevon’s 50% partnership in Chevron Phillips Chemical, which produces polymers, aromatics, specialty chemicals, and plastics.

The Upstream segment (about a quarter of revenue) explores for, develops, and produces crude oil and natural gas. It liquefies, transports, and regasifies liquefied natural gas (LNG), transports crude oil by major international pipelines, and operates a gas-to-liquids plant.

It also processes, transports, stores, and markets natural gas. The segment operates more than 47,000 productive oil and gas wells (net) worldwide. About 65% of its production volume comes from some 25 countries outside the US.

Chevron has an ownership in roughly 58,700 oil wells (the sum of its interests equates to roughly 40,000 fully owned wells) and more than 6,600 gas well (more than 4,000 net gas wells).

Where is the geographical reach of Chevron?

San Ramon, CA-headquartered Chevron has substantial Upstream operations in the Americas and Asia and a lesser presence in Africa, Europe, and Australia.

Chevron’s Upstream portfolio contains hundreds of assets, including LNG assets in Australia, legacy crude oil assets in Kazakhstan, unconventional assets (shale, oil sands) in the United States, Canada and Argentina, and deep-water assets in Nigeria, Angola and the U.S. Gulf of Mexico.

Upstream sees about 75% of its revenue come from non-US sources.

The Downstream segment operates five refineries in the US, one in Thailand, and has interests in another three affiliated (non-owned) facilities. It sells product through nearly 13,000 gas stations and around 70 airports worldwide.

Chevon’s chemical operations own or have joint-ventures in some 30 manufacturing plants and two R&D centers worldwide. Downstream revenue comes more from non-US sources than US ones.

All in all, the company generates about 45% of revenues domestically.

What is Chevron’s Sales and Marketing Strategy?

Chevron’s customers include organizations such as heavy industry firms, utility companies, airlines, and car-driving consumers. The company sells crude oil, natural gas, and natural gas liquids from its producing operations under a variety of contractual arrangements.

In addition, Chevron also makes third-party purchases and sales of crude oil, natural gas, and natural gas liquids in connection with its trading activities.

The company markets an extensive line of lubricant and coolant products under product names such as Havoline, Delo, Meropa, Rando, Clarity, Taro, and Ursa in the US and Chevron, Texaco, and Caltex brands worldwide.

What is Chevron Financial Performance?

Chevron has struggled to attain meaningful revenue growth in recent years while profits have fluctuated.

In 2019, sales fell 12% to $139.9 billion. The decreased in 2019 mainly due to lower refined product, crude oil and natural gas prices, and lower crude oil and refined product volumes.

Net income fell 80% to $2.9 billion due to decrease sales in its revenue and higher operating expenses.

Chevron’s cash on hand fell slightly during 2019 ending the year $3.6 billion lower at $6.9 billion. The company’s operations generated $27.3 billion, while investing activities used $11.5 billion and financing activities used $19.8 billion.

Chevron’s main cash uses in 2019 were capital expenditures, long-term debt repayments, and dividends.

What is Chevron Future Strategy?

Chevron’s primary objective is to deliver industry-leading results and superior shareholder value in any business environment. In the upstream, the company’s strategy is to deliver industry-leading returns while developing high-value resource opportunities.

In the downstream, the company’s strategy is to grow earnings across the value chain and make targeted investments to lead the industry in returns.

In support of the company’s approach to the energy transition, Chevron is focused on lowering carbon intensity cost efficiently, increasing the use of renewables in its business, and investing in future breakthrough technologies.

What are Chevron’s Mergers and Acquisitions?

In 2020, Chevron Australia Downstream, a wholly-owned subsidiary of Chevron, acquired Puma Energy Asia Pacific B.V. of all shares and equity interests of Puma Energy (Australia) Holdings Pty Ltd for the amount of AU$425 million.

The acquisition adds a network of more than 360 company-owned and retailer-owned service stations, a commercial and industrial fuels business, owned or leased seaboard import terminals and fuel distribution depots to Chevron’s Australian portfolio.

In 2019, Chevron had an agreement to buy Anadarko Petroleum for $33 million. However, Occidental Petroleum swooped in with a $38 million offer, which Anadarko accepted. Chevron ended up with a $1 billion termination fee paid by Anadarko.

In mid-2019, Chevron acquired Pasadena Refining System and PRSI Trading from Petrobras America for $350 million. PRSI’s 466-acre complex in Pasadena, Texas, adds a second refinery to Chevron USA’s Gulf Coast downstream business, which also includes a refinery in Pascagoula, Mississippi.

What are Chevron’s Mergers and Acquisitions?

Chevron’s earliest predecessor was the Pacific Coast Oil Company of San Francisco incorporated in 1879. This was thirty years after the California gold rush, and a small firm began digging for a new product — oil.

The crude came from wildcatter Frederick Taylor’s well located north of Los Angeles. In 1879 Taylor and other oilmen formed Pacific Coast Oil, attracting the attention of John D. Rockefeller’s Standard Oil. The two competed fiercely until Standard took over Pacific Coast in 1900.

Another predecessor, the Texas Fuel Company, was founded in 1901 in Beaumont, Texas.

In 1911, the federal government broke up Standard Oil into several pieces as per the Sherman Act. One of those pieces, Standard Oil Co.

(California), went on to become Chevron when in 1977, a major organizational change led to the formation of Chevron USA merging six US oil and has operations into one. That name stuck since.

In 1985, Gulf Oil merged with Chevron, and the modern brand got even more recognition as the company became the top refiner and marketer of oil and gas liquids in the US.

What is Chevron’s History?

Thirty years after the California gold rush, a small firm began digging for a new product — oil. The crude came from wildcatter Frederick Taylor’s well located north of Los Angeles.

In 1879 Taylor and other oilmen formed Pacific Coast Oil, attracting the attention of John D. Rockefeller’s Standard Oil. The two competed fiercely until Standard took over Pacific Coast in 1900.

When Standard Oil was broken up in 1911, its West Coast operations became the stand-alone Standard Oil Company (California), which was nicknamed Socal and sold Chevron-brand products.

After winning drilling concessions in Bahrain and Saudi Arabia in the 1930s, Socal summoned Texaco to help, and they formed Caltex (California-Texas Oil Company) as equal partners.

In 1948 Socony (later Mobil ) and Jersey Standard (later Exxon ) bought 40% of Caltex’s Saudi operations, and the Saudi arm became Aramco (Arabian American Oil Company).

Socal exploration pushed into Louisiana and the Gulf of Mexico in the 1940s. In 1961 it bought Standard Oil Company of Kentucky (Kyso). The 1970s brought setbacks: Caltex holdings were nationalized during the OPEC-spawned upheaval, and the Saudi Arabian government claimed Aramco in 1980.

In 1984 Socal was renamed Chevron and doubled its reserves with its $13 billion purchase of Gulf Corp., which had origins in the 1901 Spindletop gusher in Texas. Gulf became an oil power by developing Kuwaiti concessions but was hobbled when those assets were nationalized in 1975.

After Gulf was rocked by disclosures that it had an illegal political slush fund, Socal stepped in. The deal loaded the new company with debt, and it cut 20,000 jobs and sold billions in assets.

Chevron bought Tenneco’s Gulf of Mexico properties in 1988 and in 1992 swapped fields valued at $1.1 billion for 15.7 million shares of Chevron stock owned by Pennzoil. It also moved into the North Sea in 1994.

In the 1990s Chevron gave its retailing units a tune-up. It allied with McDonald’s (1995) to combine burger stands and gas stations in 12 western states. In addition, the company sold 450 UK gas stations and a refinery to Shell (1997).

Meanwhile, Chevron sold its natural gas operation in 1996 for a stake in Houston-based NGC (later Dynegy ; sold in 2007), and it signed an onshore exploration contract in China the next year.

Poor economic conditions in Asia and slumping oil prices in 1998 forced Chevron to shed some US holdings, including California properties. Looking for growth overseas, in 1999 it bought Rutherford-Moran Oil, increasing its interests in Thailand, and Petrolera Argentina San Jorge, Argentina’s #3 oil company.

Chevron trimmed about 10% of its workforce in 1999 and 2000 in an effort to cut costs. As the rest of the industry consolidated, Chevron discussed merging with Texaco, but the talks collapsed in 1999. Later that year CEO Ken Derr retired, and vice chairman Dave O’Reilly replaced him.

In 2000 Chevron formed a joint venture with Phillips Petroleum (later ConocoPhillips ) that combined the companies’ chemicals businesses as Chevron Phillips Chemical .

That year talks with Texaco were revived and Chevron agreed to acquire its Caltex partner for about $35 billion in stock and about $8 billion in assumed debt. The deal, completed in 2001, formed ChevronTexaco.

Part of the 2001 deal to acquire Texaco required Chevron to sell exclusive rights to the Texaco brand for a period of three years. A division of Royal Dutch Shell owned rights to the Texaco brand until 2004 and changed the name of the service stations to Shell.

Once Chevron regained the rights to the Texaco name, it revitalized the brand name by adding about 400 Texaco stations in the western US.

In 2002 ChevronTexaco divested its stakes in US downstream joint ventures Equilon (to Shell) and Motiva (to Shell and Saudi Aramco).

It also sold part of a Gulf of Mexico pipeline and two natural gas plants in Louisiana to Duke Energy, and its 12.5% stake in a natural gas liquids fractionator to Enterprise Products Partners. In 2004 ChevronTexaco sold 150 US natural gas and oil properties to XTO Energy for $912 million.

The company changed its name to Chevron Corporation in 2005. Chevron acquired Unocal in 2005 for more than $16 billion, boosting its proved reserves by about 15%.

Equally attractive to Chevron was the strategic position of Unocal’s operations; at a time when industries are trying to get a foothold in China, the reserves in Southeast Asia could easily be transported not only there but also to a surging India as well.

Unocal’s other operations easily supplied the US (from the Gulf of Mexico) and Europe (Caspian Sea) with gas and oil. Chevron bought a 5% stake in Indian refiner Reliance Petroleum for about $300 million in 2006.

That year a company-led group of exploration firms announced a new successful oil strike in the Gulf of Mexico.

The company has also been growing its natural gas assets. In 2008 it announced plans to construct a $3.1 billion natural gas project in the Gulf of Thailand. The project will have the capacity to meet 14% of Thailand’s natural gas needs.

Ultrapar acquired Chevron’s Texaco-branded fuel distribution business in Brazil for $720 million in 2008, and the next year Chevron sold its Nigerian fuel marketing business.

A leading producer of viscous, heavy oil, in 2010 a Chevron-led consortium was awarded the rights to 40% of a heavy oil project in Venezuela’s Orinoco Oil Belt.

In 2010, in the wake of the BP oil rig disaster in the Gulf of Mexico, Chevron announced it was forming a $1 billion joint venture with Exxon Mobil, Royal Dutch Shell, and ConocoPhillips to create a rapid-response system capable of capturing and containing up to 100,000 barrels of oil from an oil spill in water depths of 10,000 feet.

Looking to develop a deepwater area unaffected by US regulations, in 2010 the company acquired a 70% stake in three concessions in Liberia, in West Africa. Other deepwater exploration asset acquisitions that year included purchases in China and the Turkish Black Sea.

In 2010 the company began to cut its US refining and marketing business staff by 20%, and as part of this realignment, it sold its 23% stake in Colonial Pipeline to a KKR affiliate.

In 2013 company acquired exploration interests in offshore Blocks EPP44 and EPP45 (more than 8 million acres in the Bight Basin off the South Australian coast).

Growing its LNG supply and export capacity, in 2013 Chevron acquired a 50% operating interest in the Kitimat liquefied natural gas project and proposed Pacific Trail Pipeline, and a 50% stake in 644,000 acres of petroleum and natural gas rights in the Horn River and Liard Basins in British Columbia, Canada.

The company bought the assets from Apache for $405 million. In a major move, in 2011 Chevron acquired Atlas Energy in a $4.3 billion deal. The acquisition is part the company’s strategy of finding new reserves to replace reserves lost from declining fields.

It also marked Chevron’s move to become a major player in the prolific Marcellus Shale play in Pennsylvania, where a number of majors are seeking to cash in on the improved drilling technology that has made the exploitation of unconventional gas finds more commercially viable.

The purchase gave Chevron Atlas Energy’s 850 billion cu. ft. of proved natural gas reserves and 80 million cu. ft. of daily natural gas production.

It also complements Chevron’s earlier acquisitions of shale gas assets in Canada, Poland, and Romania, as well as its purchase of an additional 228,000 acres in the Marcellus Shale from Chief Oil & Gas LLC and Tug Hill, Inc. (The acquisitions added up to 5 trillion cubic feet of natural gas resources to Chevron’s existing Marcellus Shale operations.)

An earlier chapter of Chevron’s history reemerged in 2011 when the company was slapped with a bill for $18 billion in fines and charges by a court in Ecuador regarding environmental damages allegedly caused by Texaco (acquired in 2001) in the 1970s and 1980s.

Chevron challenged the findings as illegitimate and unenforceable.

Restructuring its refinery and retail businesses to cut costs, in 2011 Chevron sold its Chevron Ltd. UK unit, which operated the Pembroke refinery, to Valero for $730 million. In addition Valero agreed to pay more that $1 billion for other Chevron Ltd. assets, including 1,000 gas stations.

That year Chevron also sold its fuels marketing and aviation businesses in 16 countries in the Caribbean and Latin America and some marketing businesses in five African countries.

In 2012 the company signed a 20-year deal with Tohoku Electric Power for the delivery of liquefied natural gas (LNG) from the Chevron-operated Wheatstone natural gas project in Australia.

Growing its shale assets, in 2013 Chevron agreed to a $1.24 billion investment in YPF to help YPF develop the world’s second-largest shale gas deposit and fourth-largest shale oil reservoir, located in Argentina’s Vaca Muerta region.

In 2013 and 2012 the company also announced new exploration and production deals to expand its assets in China, Kurdistan, the Republic of Congo, Surinam, and the US.

In 2013 50%-owned affiliate GS Caltex, opened a 53,000-barrel-per-day gas oil fluid catalytic cracking unit at the Yeosu Refinery in South Korea.

The company consolidated the supply and trading functions in 2013 into a single supply and trading group within Chevron’s Gas and Midstream organization.

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