Chevron (CVX) reported first-quarter adjusted earnings that topped analyst expectations, though the headline figures revealed a sharp decline in net income and a dramatic drop in cash flow from operations.
The oil major posted adjusted earnings of $1.41 per share, surpassing the LSEG consensus estimate of $0.95 per share. However, net income fell to $2.2 billion from $3.5 billion in the same period last year, representing a five-year low for the company.
Upstream Strength vs. Downstream Weakness
Chevron's upstream segment, which handles oil and gas production, generated $3.909 billion in earnings, up from $3.758 billion a year earlier. The improvement was driven by higher crude oil prices linked to geopolitical tensions in the Middle East. Net oil-equivalent production rose to 3.858 million barrels per day from 3.353 million, with U.S. output exceeding 2 million barrels per day for the third consecutive quarter.
In contrast, the downstream refining and marketing segment swung to a loss of $817 million, compared with a profit of $325 million in the prior year. Chevron attributed the downturn primarily to accounting mismatches involving derivatives and inventory valuation.
Cash Flow Concerns
Cash flow from operations dropped sharply to $2.5 billion from $5.2 billion a year earlier. Free cash flow, after capital expenditures, turned negative at $1.5 billion. However, on an adjusted basis, free cash flow remained steady at $4.1 billion year over year.
Chief Financial Officer Eimear Bonner told Reuters that roughly $1 billion in paper positions are expected to close in the second quarter, converting into realized profits. She described the underlying business as strong, with potential for both earnings and cash flow growth.
Shareholder Returns and Buybacks
Chevron returned $6.0 billion to shareholders during the quarter, consisting of $3.5 billion in dividends and $2.5 billion in share buybacks. This marks the 16th consecutive quarter that shareholder returns exceeded $5 billion. However, buyback levels declined from the previous quarter.
RBC Capital Markets analyst Biraj Borkhataria described the results as strong but noted that the decision not to increase buybacks could leave some investors wanting more. He suggested that if cash flow improves later this year, buybacks could rise by the second quarter.
Market Reaction and Analyst Outlook
Shares of Chevron traded at $193.31 before the market open on Friday. According to a Barchart analyst snapshot, the stock carries a consensus rating of “Moderate Buy” from 26 analysts, with 16 rating it “Strong Buy,” three “Moderate Buy,” six “Hold,” and one “Strong Sell.” The group’s 2026 adjusted EPS forecast stands at $13.55.
Chevron flagged that further timing effects from derivatives and inventory accounting could emerge if oil prices continue to rise, only to reverse if prices fall. Additionally, production was impacted by downtime at Tengizchevroil in Kazakhstan and curtailments in the Middle East.
CEO Mike Wirth described the quarter as a “solid first quarter performance,” highlighting gains from the Hess integration, as well as strong operations in the Gulf of America and the Permian Basin.
