Chevron Earnings: Weaker-Than-Expected Results, TCO Delays Weigh on Shares, but Outlook Unchanged

Chevron's third-quarter earnings not only fell below market expectations, but management also announced a further delay and cost increase to its two major projects at its TCO asset in Kazakhstan. Both the Wellhead Pressure Management Project and Future Growth Project will start about six months later than previously expected, in first-half 2024 and first-half 2025, respectively, while the projects’ total costs will be 3%-5% higher than expected. Production in 2024 will be lower than in 2023 because of heavier turnarounds as well. Finally, TCO cash flow will be about $1 billion lower in 2025 than previous guidance, given lower volumes from the project delays. The combined news of weaker-than-expected earnings and delays to Chevron’s major projects sent shares lower. However, we think the selloff (about $17 billion in lost market cap) is short-sighted and largely an overreaction.