Chevron: Built for Cash, Not Clicks

Chevron (NYSE:CVX) spent two years in arbitration hell over the Hess deal — every analyst calling it a distraction, every bear pointing to the $53 billion price tag. Yet here it is, trading at $153 with free cash flow most tech companies would envy.

At 16.5× forward earnings on 2026 EPS of $9.27, you're paying for discipline, not disruption. Upstream margins hold near 80%, production's climbing 6% annually, and the "post-acquisition overhang" never materialized.

Bulls see Guyana + Permian driving $26 billion free cash flow by 2027; bears point to $70 oil dependency and Tengiz execution risk. I see a cash machine that just locked up one of the world's lowest-cost oil fields while competitors chase shale scraps.

At a $314B market cap and 4.5% yield, Chevron's priced like a survivor — but performing like a compounder. Target: $170 by 2027.

Fundamentals: Free Cash Flow Covers the Dividend 1.7x

Chevron's 2025 numbers: revenue down 8% to $181 billion, with operating EPS at $8.34 — a 17% decline on merger costs. Production? Not EVs, but barrels: 3.4 million boe/d, up 3%, led by Permian's 800,000 boe/d. Full-year 2025 tracks to $20 billion in free cash flow — covering the $12 billion dividend 1.7 times with $8 billion left for buybacks. Bloomberg projects 2026 EPS rebounding 23% to $10.27 as Hess synergies kick in.

Net debt: 16% of capital with an 82% payout ratio — sustainable even when Brent tanks. Beta at 0.81 means 20% less volatility than the market.

Historical Performance:

(Chart source: FAST Graphs®, © 2025. Used under license for educational commentary.)

Over 20 years, Chevron's earnings swung with oil prices — but dividends never stopped. Not in 2008, 2015, or 2020.

The Bull Case: Scale Wins When Costs Matter

The Hess deal added 30% of Guyana's Stabroek block — breakevens below $35/barrel vs. peer averages above $50, per Morningstar. Chevron now holds 11 billion barrels of reserves with Permian acreage printing cash at $40 oil. Guyana's FPSOs come online by 2028, adding 500,000+ boe/d. Tengiz expansion brings another 260,000 boe/d by 2026. If Brent holds $70-75, free cash flow hits $22-26 billion by 2027 — at 15-17× multiple, that's $170-180 per share.

Dividend? 4.5% yield, up consistently for 38 years. CFRA: "Mid-single-digit FCF growth through 2028 achievable."

My Take: Discipline Beats Narratives

Chevron's edge is capital allocation. Unlike EV subsidies shifting every election, oil demand hit 102 million barrels/day in 2024 per IEA — EVs still under 20% of new car sales globally. Breakevens under $40 (Permian) and $35 (Guyana) mean cash flow stays positive at $60 Brent. Bloomberg's 2027 consensus: $10+ EPS with $22 billion FCF equals $170-180 per share at 17× — right where quality energy trades. Peers like XOM? Exxon's at 13× with worse discipline.

Competition and Execution: Guyana Changes the Math

Chevron's undercutting shale peers at $35 breakevens in Guyana — 600,000 boe/d by 2028. China exposure minimal at 8% revenue. Tengiz is $2 billion over budget but 90% complete, adding 260,000 boe/d high-margin output. This offsets delay risk for steady 5-6% growth.

Bottom Line

Chevron's valuation bets on execution over moonshots. For income investors eyeing predictable cash, this works at $153. My conviction: if Brent stays above $65 and Guyana delivers by 2028, this reprices to $170-180.

What's your take? Can Chevron's Guyana bet justify a 16.5× multiple in a world rotating out of fossil fuels? Share your thoughts below.

Price Target: $165-180 (base case $170)

Disclosure: Long CVX. Not investment advice.

Charts sourced from FAST Graphs® for educational analysis. I'm not affiliated with FAST Graphs. Past performance is not indicative of future results

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