Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Second Quarter 2022 Compared with Second Quarter 2021

Key Financial Results


Earnings by Business Segment
	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)				(Millions of dollars)
Upstream
United States	$	3,367	$	1,446	$	6,605	$	2,387
International	5,191		1,732		8,887		3,141
Total Upstream	8,558		3,178		15,492		5,528
Downstream
United States	2,440		776		2,926		646
International	1,083		63		928		198
Total Downstream	3,523		839		3,854		844
Total Segment Earnings	12,081		4,017		19,346		6,372
All Other	(459)		(935)		(1,465)		(1,913)
Net Income (Loss) Attributable to Chevron Corporation (1) (2)	$	11,622	$	3,082	$	17,881	$	4,459

(1) Includes foreign currency effects.	$	668	$	43	$	450	$	41
(2) Income (loss) net of tax; also referred to as “earnings” in the discussions that follow.

Net income attributable to Chevron Corporation for second quarter 2022 was $11.6 billion ($5.95 per share — diluted), compared with $3.1 billion ($1.60 per share — diluted) in the second quarter of 2021. The net income attributable to Chevron Corporation for the first six months of 2022 was $17.9 billion ($9.17 per share — diluted), compared with $4.5 billion ($2.32 per share — diluted) in the first six months of 2021.

Upstream earnings in second quarter 2022 were $8.6 billion compared with $3.2 billion in the corresponding 2021 period. The increase was mainly due to higher realizations and higher foreign currency benefits, partially offset by higher operating expenses largely due to an early contract termination at Sabine Pass. Earnings for the first six months of 2022 were $15.5 billion compared with $5.5 billion a year earlier. The increase was mainly due to higher realizations and favorable foreign currency effects.

Downstream earnings in second quarter 2022 were $3.5 billion compared with $839 million in the corresponding 2021 period. The increase was mainly due to higher margins on refined product sales and favorable foreign exchange effects, partially offset by higher operating expenses and lower earnings from the 50 percent-owned Chevron Phillips Chemical Company. Earnings for the first six months of 2022 were $3.9 billion compared with $844 million in the corresponding 2021 period. The increase was mainly due to higher margins on refined product sales and favorable foreign currency effects, partially offset by higher operating expenses.

Refer to “Results of Operations” for additional discussion of results by business segment and “All Other” activities for the second quarter and first six months of 2022 versus the same periods in 2021.

Business Environment and Outlook

Chevron Corporation* is a global energy company with substantial business activities in the following countries: Angola, Argentina, Australia, Bangladesh, Brazil, Canada, China, Egypt, Equatorial Guinea, Israel, Kazakhstan, Kurdistan Region of Iraq, Mexico, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, the Philippines, Republic of Congo, Singapore, South Korea, Thailand, the United Kingdom, the United States, and Venezuela.

_____________________

Incorporated in Delaware in 1926 as Standard Oil Company of California, the company adopted the name Chevron Corporation in 1984 and ChevronTexaco Corporation in 2001. In 2005, ChevronTexaco Corporation changed its name to Chevron Corporation. As used in this report, the term “Chevron” and such terms as “the company,” “the corporation,” “our,” “we,” “us” and “its” may refer to Chevron Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole, but unless stated otherwise they do not include “affiliates” of Chevron — i.e., those companies generally owned 50 percent or less. All of these terms are used for convenience only and are not intended as a precise description of any of the separate companies, each of which manages its own affairs.

The company’s objective is to deliver higher returns, lower carbon and superior shareholder value in any business environment. Earnings of the company depend mostly on the profitability of its upstream business segment. The most significant factor affecting the results of operations for the upstream segment is the price of crude oil, which is determined in global markets outside of the company’s control. In the company’s downstream business, crude oil is the largest cost component of refined products. Periods of sustained lower commodity prices could result in the impairment or write-off of specific assets in future periods and cause the company to adjust operating expenses, including employee reductions, and capital and exploratory expenditures, along with other measures intended to improve financial performance.

Governments, companies, communities, and other stakeholders are increasingly supporting efforts to address climate change, recognizing that individuals and society benefit from access to affordable, reliable, and ever-cleaner energy. International initiatives and national, regional and state legislation and regulations that aim to directly or indirectly reduce GHG emissions are in various stages of adoption and implementation. These policies, some of which support the global net zero emissions ambitions of the Paris Agreement, can change the amount of energy consumed, the rate of energy-demand growth, the energy mix, and the relative economics of one fuel versus another. Implementation of these policies can be dependent on, and can affect the pace of, technological advancements, the granting of necessary permits by governing authorities, the availability of cost-effective, verifiable carbon credits, the availability of suppliers that can meet sustainability and other standards, evolving regulatory requirements affecting ESG standards or other disclosures, and evolving standards for tracking and reporting on emissions and emission reductions and removals. Beyond the legislative and regulatory landscape, ever changing customer and consumer behavior can also influence energy demand by affecting preferences and use of the company’s products or competitors’ products, now and in the future.

Chevron supports the Paris Agreement’s global approach to governments addressing climate change and is committed to taking actions to help lower the carbon intensity of its operations while continuing to meet the need for energy that supports society. Chevron integrates climate change-related issues and the regulatory and other responses to these issues into its strategy and planning, capital investment reviews, and risk management tools and processes, where it believes they are applicable. They are also factored into the company’s long-range supply, demand, and energy price forecasts. These forecasts reflect estimates of long-range effects from climate change-related policy actions, such as renewable fuel penetration and energy efficiency standards, and demand response to oil and natural gas prices. The actual level of expenditure required to comply with new or potential climate change-related laws and regulations and amount of additional investments in new or existing technology or facilities, such as carbon capture and storage, is difficult to predict with certainty and is expected to vary depending on the actual laws and regulations enacted or customer and consumer preference in a jurisdiction, the company’s activities in it, and market conditions.

Although the future is uncertain, many published outlooks conclude that fossil fuels will remain a significant part of an energy system that increasingly incorporates lower carbon sources of supply. The company will continue to develop oil and gas resources to meet customers’ demand for energy. At the same time, Chevron believes that the future of energy is lower carbon. The company will continue to maintain flexibility in its portfolio to be responsive to changes in policy, technology, and customer preferences. Chevron aims to grow its traditional oil and gas business, lower the carbon intensity of its operations and grow lower carbon businesses in renewable fuels, hydrogen, carbon capture and offsets. To grow its lower carbon businesses, Chevron plans to target sectors of the economy where emissions are harder to abate or that cannot be easily electrified, while leveraging the company’s capabilities, assets and customer relationships. The company’s traditional oil and gas business may increase or decrease depending upon regulatory or market forces, among other factors.

Chevron's previously disclosed 2050 net zero upstream aspiration, carbon intensity targets and planned lower-carbon capital spend through 2028 can be found on pages 32 through 34 of the company’s 2021 Annual Report on Form 10-K.

Refer to “Cautionary Statements Relevant to Forward-Looking Information” on page 2 and to “Risk Factors” on pages 20 through 25 of the company’s 2021 Annual Report on Form 10-K for a discussion of some of the inherent risks that could materially impact the company’s results of operations or financial condition.

The effective tax rate for the company can change substantially during periods of significant earnings volatility. This is due to the mix effects that are impacted by both the absolute level of earnings or losses and whether they arise in higher or lower tax rate jurisdictions. As a result, a decline or increase in the effective income tax rate in one period may not be indicative of expected results in future periods. Additional information related to the company’s effective income tax rate is included in Note 10 Income Taxes to the Consolidated Financial Statements.

The company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value and to acquire assets or operations complementary to its asset base to help augment the company’s financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods.

The company closely monitors developments in the financial and credit markets, the level of worldwide economic activity, and the implications for the company of movements in prices for crude oil and natural gas. Management takes these developments into account in the conduct of daily operations and for business planning.

The outbreak of COVID-19 caused a significant decrease in demand for our products and created disruptions and volatility in the global marketplace beginning late in first quarter 2020. Demand has largely recovered; however, there continues to be uncertainty around the extent to which the COVID-19 pandemic may impact our future results, which could be material.

Comments related to earnings trends for the company’s major business areas are as follows:

Upstream Earnings for the upstream segment are closely aligned with industry prices for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by OPEC+ countries, actions of regulators or governments, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control such as the COVID-19 pandemic, and regional supply interruptions or fears thereof that may be caused by civil unrest, political uncertainty or military conflicts such as the ongoing conflict in Ukraine. Any of these factors could also inhibit the company’s production and/or export capacity in an affected region. The company closely monitors developments in the countries in which it operates and holds investments and seeks to manage risks in operating its facilities and businesses.

The longer-term trend in earnings for the upstream segment is also a function of other factors, including the company’s ability to find or acquire and efficiently produce crude oil and natural gas, changes in fiscal terms of contracts, and changes in tax, environmental and other applicable laws and regulations.

Caspian Pipeline Consortium (CPC), an equity affiliate, operates a 935-mile crude oil export pipeline from the Tengiz Field in Kazakhstan to tanker-loading facilities at Novorossiysk on the Russian coast of the Black Sea, providing the main export route for crude oil production from both TCO and Karachaganak and other producing fields in Kazakhstan. On March 21, 2022, two of the three offshore loading moorings at the CPC marine terminal were damaged in a weather-related incident. As a result, production at TCO was curtailed to approximately 70 percent of capacity beginning March 25, 2022. Repairs have since been completed for the two damaged offshore loading moorings. TCO production facilities returned to normal rates on April 23, 2022. This incident did not have a material impact on the company's results of operations or consolidated financial position.

Governments (including Russia) have imposed and may impose additional sanctions and other trade laws, restrictions and regulations that could lead to disruption in our ability to produce, transport and/or export crude in the region around Russia and could have an adverse effect on CPC operations and/or the company’s financial position. The financial impacts of such risks, including presently imposed sanctions, are not currently material for the company; however, it remains uncertain how long these conditions may last or how severe they may become.

The company's third party costs can be subject to external factors beyond its control including, but not limited to: the general level of inflation, tariffs or other taxes imposed on goods or services, and market-based prices

charged by the industry’s material and service providers. Chevron utilizes contracts with various pricing mechanisms, so there may be a lag before the company’s costs reflect the changes in market trends.

Inflationary pressures continue for both oil and gas inputs (such as rigs, pipe and well services, etc.) as well as other industrial equipment and materials. In the near term, slowing economic activity could moderate inflationary pressures. The United States rig count is on track to be at pre-pandemic levels in the third quarter of this year, driven in part by an increase in gas directed drilling as U.S. natural gas prices and LNG exports increase. The international rig count at the end of the second quarter was up from the previous quarter on rising natural gas drilling with oil rigs steady.

The company is actively managing its timing of scheduled work, contracting, procurement, and supply chain activities to assure reliable supply of goods and services, while effectively managing costs in support of its operations. Supply chain disruptions continue to limit the availability and deliverability of some inputs throughout the industry. In response to supply backlogs, Chevron is planning for longer lead times, identifying alternative supply sources and substituting materials that can be utilized.

The chart above shows the trend in benchmark prices for Brent crude oil, West Texas Intermediate (WTI) crude oil, and U.S. Henry Hub natural gas. The Brent price averaged $71 per barrel for the full-year 2021. During the second quarter of 2022, Brent averaged $114 per barrel and ended July at about $114. The WTI price averaged $68 per barrel for the full-year 2021. During the second quarter of 2022, WTI averaged $109 per barrel and ended July at about $99. The majority of the company’s equity crude production is priced based on the Brent and WTI benchmarks. Crude prices have remained strong in the second quarter of 2022 driven by geopolitical issues and OPEC+ production being below announced quotas, although demand growth is slowing down due to macroeconomic factors and high prices. (Refer to “Selected Operating Data” for the company’s average U.S. and international crude oil sales prices).

In contrast to price movements in the global market for crude oil, price changes for natural gas are also impacted by seasonal supply/demand and infrastructure conditions in local markets. In the United States, prices at Henry Hub averaged $5.92 per thousand cubic feet (MCF) for the first six months of 2022, compared with $3.16 during the first six months of 2021. At the end of July 2022, the Henry Hub spot price was $8.66 per MCF.

Outside the United States, price changes for natural gas also depend on a wide range of supply, demand and regulatory circumstances. The company’s long-term contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices. Most of the equity LNG offtake from the operated Australian LNG assets is committed under binding long-term contracts, with some sold in the Asian spot LNG market. International natural gas realizations averaged $9.04 per MCF during the first six months of 2022, compared with $4.82 per MCF in the same period last year. (Refer to “Selected Operating Data” for the company’s average natural gas sales prices for the U.S. and international regions.)

The company’s worldwide net oil-equivalent production in the first six months of 2022 averaged 2.98 million barrels per day, a decrease of 5 percent from the first six months of 2021 mainly as a result of contract expirations in Thailand and Indonesia. About 27 percent of the company’s net oil-equivalent production in the first six months of 2022 occurred in OPEC+ member countries of Angola, Equatorial Guinea, Kazakhstan, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait and Republic of Congo.

Refer to “Results of Operations” for additional discussion of the company’s upstream business.

Downstream Earnings for the downstream segment are closely tied to margins on the refining, manufacturing and marketing of products that include gasoline, diesel, jet fuel, lubricants, fuel oil, fuel and lubricant additives, petrochemicals and renewable fuels. Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products and petrochemicals, and by changes in the price of crude oil, other refinery and petrochemical feedstocks, and natural gas. Industry margins can also be influenced by inventory levels, geopolitical events, costs of materials and services, refinery or chemical plant capacity utilization, maintenance programs, and disruptions at refineries or chemical plants resulting from unplanned outages due to severe weather, fires or other operational events.

Other factors affecting profitability for downstream operations include the reliability and efficiency of the company’s refining, marketing and petrochemical assets, the effectiveness of its crude oil and product supply functions, and the volatility of tanker-charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refining, marketing and petrochemical assets, and changes in tax, environmental, and other applicable laws and regulations.

Refining margins have been strong in 2022 because of recovering demand for refined products, low product inventories, industry refinery capacity constraints and lower product exports from Russia and China. Refining utilization has been strong in 2022 to keep pace with demand growth. Although refining margins have been elevated, there are signs that higher refined product prices and concerns over macroeconomic conditions are slowing demand and reducing margins.

The company’s most significant marketing areas are the West Coast and Gulf Coast of the United States and Asia Pacific. Chevron operates or has significant ownership interests in refineries in each of these areas. Additionally, the company has a growing presence in renewable fuels, as evidenced by the recent acquisition of Renewable Energy Group, Inc.

Refer to “Results of Operations” for additional discussion of the company’s downstream operations.

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.

Operating Developments

Noteworthy operating developments in recent months included the following:

Indonesia – Announced a partnership with Indonesia’s PT Pertamina (Persero) to explore potential lower carbon business opportunities in Indonesia.
Kazakhstan – Announced a memorandum of understanding to explore potential lower carbon business opportunities in Kazakhstan via a collaboration with JSC NC “KazMunayGas”.
United States – Sanctioned the Ballymore project in the deepwater U.S. Gulf of Mexico. The field is planned to be produced through an existing facility with an allocated capacity of 75,000 barrels of crude oil per day.
United States – Announced launch of a carbon capture and storage (CCS) project aimed at reducing the carbon intensity of the company's upstream operations in California.
United States – Formed Bunge Chevron Ag Renewables LLC, a joint venture designed to develop renewable fuel feedstocks leveraging Bunge’s expertise in oilseed processing and farmer relationships and Chevron’s expertise in fuels manufacturing and marketing.
United States – Acquired a 50 percent stake in an expanded joint venture to develop the Bayou Bend CCS hub, with the goal of it becoming one of the first offshore CCS projects in the United States.
United States – Invested in lower-carbon technologies, including Infinitum Electric (ultra-high-efficiency-lightweight motors), Emerald Technology Ventures (sustainable packaging), and TAE Technologies (nuclear fusion).
United States – Announced agreement to supply fuel linked to renewable natural gas for a Walmart Inc. demonstration of Cummins Inc.’s new 15-liter natural gas engine for heavy-duty trucks.
United States – Completed acquisition of Renewable Energy Group, Inc., making Chevron one of the leading renewable fuels producers in the United States.
United States – Earned Project Canary's highest certification rating on operational and environmental performance for almost all participating Permian and DJ basins upstream assets, positioning the company to market responsibly sourced natural gas (RSG) from the certified assets beginning in the second half of 2022.

Results of Operations

Business Segments The following section presents the results of operations and variances on an after-tax basis for the company’s business segments — Upstream and Downstream — as well as for “All Other.” (Refer to Note 7 Operating Segments and Geographic Data for a discussion of the company’s “reportable segments,” as defined under the accounting standards for segment reporting.)

Upstream


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
U.S. Upstream Earnings	$	3,367	$	1,446	$	6,605	$	2,387

U.S. upstream reported earnings of $3.4 billion in second quarter 2022, compared with $1.4 billion from a year earlier. The increase was primarily due to higher realizations of $2.7 billion, partially offset by higher operating expenses of $790 million largely due to an early contract termination at Sabine Pass.

U.S. upstream reported earnings of $6.6 billion in the first six months of 2022, compared with $2.4 billion from a year earlier. The increase was primarily due to higher realizations of $4.8 billion and higher sales volumes of $300 million, partially offset by higher operating expenses of $870 million largely due to an early contract termination at Sabine Pass.

The average realization per barrel for U.S. crude oil and natural gas liquids in second quarter 2022 was $89, compared with $54 a year earlier. The average realization per barrel for U.S. crude oil and natural gas liquids in the first six months of 2022 was $83, compared with $51 a year earlier. The average natural gas realization in second quarter 2022 was $6.22 per thousand cubic feet, compared with $2.16 in the 2021 period. The average natural gas realization in the first six months of 2022 was $5.13 per thousand cubic feet, compared with $2.16 in the 2021 period.

Net oil-equivalent production of 1.17 million barrels per day in second quarter 2022 was up 36,000 barrels per day, or 3 percent, from a year earlier. Net oil-equivalent production of 1.18 million barrels per day in the first six months of 2022 was up 72,000 barrels per day, or 7 percent, from a year earlier. The increase for both quarterly and year-to-date periods was due to net production increases in the Permian Basin, partially offset by normal field declines in other locations.

The net liquids component of oil-equivalent production of 888,000 barrels per day in second quarter 2022 was up 4 percent from the corresponding 2021 period. The net liquids component of oil-equivalent production of 884,000 barrels per day in the first six months of 2022 was up 7 percent from the corresponding 2021 period. Net natural gas production increased 2 percent to 1.71 billion cubic feet per day in second quarter 2022 from the 2021 comparative period. Net natural gas production was 1.77 billion cubic feet per day in the first six months of 2022, an increase of 6 percent from the 2021 period.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
International Upstream Earnings*	$	5,191	$	1,732	$	8,887	$	3,141

* Includes foreign currency effects	$	603	$	78	$	459	$	26

International upstream operations earned $5.2 billion in second quarter 2022, compared with $1.7 billion a year ago. The increase in earnings was primarily due to higher realizations of $3.0 billion and asset sale gains of $200 million, partially offset by lower sales volumes of $560 million. Foreign currency effects had a favorable impact on earnings of $525 million between periods.

International upstream operations earned $8.9 billion in the first six months of 2022, compared with $3.1 billion a year ago. The increase in earnings was primarily due to higher realizations of $5.5 billion and asset sale gains of $200 million, partially offset by lower sales volumes of $890 million. Foreign currency effects had a favorable impact on earnings of $433 million between periods.

The average sales price for crude oil and natural gas liquids in second quarter 2022 was $102 per barrel, up from $62 a year earlier. The average sales price for crude oil and natural gas liquids in the first six months of 2022 was $98 per barrel, up from $59 a year earlier. The average sales price of natural gas was $9.23 per thousand cubic feet in second quarter 2022, compared with $4.92 in the 2021 period. The average sales price of natural gas was $9.04 per thousand cubic feet in the first six months of 2022, compared with $4.82 in the 2021 period.

Net oil-equivalent production of 1.72 million barrels per day in second quarter 2022 was down 266,000 barrels per day from second quarter 2021. Net oil-equivalent production of 1.80 million barrels per day in the first six months of 2022 was down 218,000 barrels per day, or 11 percent, from a year earlier. The decrease for both quarterly and year-to-date periods was primarily due to lower production following expiration of the Erawan concession in Thailand and Rokan concession in Indonesia and unfavorable entitlement effects due to higher prices.

The net liquids component of oil-equivalent production of 799,000 barrels per day in second quarter 2022 decreased 19 percent from the 2021 period. The net liquids component of oil-equivalent production of 828,000 barrels per day in the first six months of 2022 decreased 18 percent from the 2021 period. Net natural gas production of 5.55 billion cubic feet per day in second quarter 2022 decreased 7 percent from the 2021 period. Net natural gas production of 5.83 billion cubic feet per day in the first six months of 2022 decreased 4 percent from the 2021 period.

Downstream


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
U.S. Downstream Earnings	$	2,440	$	776	$	2,926	$	646

U.S. downstream reported earnings of $2.4 billion in second quarter 2022, compared with $776 million a year earlier. The increase was mainly due to higher margins on refined product sales of $2.1 billion, partially offset by lower earnings from the 50 percent-owned Chevron Phillips Chemical Company of $270 million and higher operating expenses of $230 million.

U.S. downstream reported earnings of 2.9 billion in the first six months of 2022, compared with $646 million a year earlier. The increase was mainly due to higher margins on refined product sales of $2.66 billion, partially offset by higher operating expenses of $280 million and lower earnings from the 50 percent-owned Chevron Phillips Chemical Company of $80 million.

Refinery crude oil input in second quarter 2022 decreased 8 percent to 881,000 barrels per day and for the first six months of 2022, crude oil input decreased 2 percent to 898,000 barrels per day from the corresponding 2021 period. The decrease in both quarterly and year-to-date periods was primarily due to planned turnarounds.

Refined product sales in second quarter 2022 were up 4 percent to 1.21 million barrels per day and for the first six months of 2022, refined product sales were up 10 percent to 1.21 million barrels per day from the corresponding 2021 periods. The increase for both quarterly and six-month periods was mainly due to higher jet fuel demand as travel restrictions associated with the COVID-19 pandemic continue to ease.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
International Downstream Earnings*	$	1,083	$	63	$	928	$	198

* Includes foreign currency effects	$	145	$	1	$	168	$	60

International downstream reported earnings of $1.1 billion in second quarter 2022, compared with $63 million a year earlier. The increase in earnings was mainly due to higher margins on refined product sales of

$1.1 billion and a favorable swing in foreign currency effects of $144 million between periods, partially offset by higher operating expenses of $160 million.

International downstream reported earnings of $928 million in the first six months of 2022, compared with $198 million a year earlier. The increase in earnings was mainly due to higher margins on refined product sales of $970 million and a favorable swing in foreign currency effects of $108 million between periods, partially offset by higher operating expenses of $290 million.

Refinery crude oil input of 634,000 barrels per day in second quarter 2022 increased 9 percent from the year-ago period. For the first six months of 2022, crude oil input was 626,000 barrels per day, up 12 percent from the year-ago period. The increase for both the quarterly and year-to-date periods was due to increased refinery runs in response to higher demand.

Total refined product sales in second quarter 2022 were up 4 percent to 1.34 million barrels per day and for the first six months of 2022, refined product sales were up 5 percent to 1.33 million barrels per day from the corresponding 2021 periods. The increase for both quarterly and six-month periods was mainly due to higher jet fuel demand as travel restrictions associated with the COVID-19 pandemic continue to ease.

All Other


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Earnings/(Charges)*	$	(459)	$	(935)	$	(1,465)	$	(1,913)

* Includes foreign currency effects	$	(80)	$	(36)	$	(177)	$	(45)

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.

Net charges in second quarter 2022 were $459 million, compared to $935 million a year earlier. The decrease in net charges between periods was mainly due to lower employee benefit costs, pension expense and interest expense, partially offset by a unfavorable swing of $44 million in foreign currency effects.

Net charges in the first six months of 2022 were $1.5 billion, compared to $1.9 billion a year earlier. The decrease in net charges between periods was mainly due to lower pension expense, employee benefit costs and interest expense, partially offset by a unfavorable swing of $132 million in foreign currency effects.

Consolidated Statement of Income

Explanations of variations between periods for selected income statement categories are provided below:


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Sales and other operating revenues	$	65,372	$	36,117	$	117,686	$	67,193

Sales and other operating revenues increased $29.3 billion for the second quarter and $50.5 billion for the six-month period mainly due to higher refined product, crude oil and natural gas prices.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Income from equity affiliates	$	2,467	$	1,442	$	4,552	$	2,353

Income from equity affiliates in the second quarter and six-month period increased mainly due to higher upstream-related earnings from TCO in Kazakhstan and Angola LNG and higher downstream-related earnings from GS Caltex in South Korea, partially offset by lower earnings from CPChem.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Other income (loss)	$	923	$	38	$	897	$	80

Other income for the second quarter and six-month period increased due to a favorable swing in foreign currency effects and higher gains on asset sales.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Purchased crude oil and products	$	40,003	$	20,629	$	72,652	$	38,197

Purchased crude oil and products increased $19.4 billion for the second quarter and $34.5 billion for the six-month period primarily due to higher crude oil, natural gas and refined product prices.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Operating, selling, general and administrative expenses	$	7,181	$	5,995	$	13,786	$	11,952

Operating, selling, general and administrative expenses in the second quarter increased $1.2 billion primarily due to an early contract termination charge at Sabine Pass and higher transportation expenses, partially offset by lower employee benefit expenses. Operating, selling, general and administrative expenses in the six-month period increased $1.8 billion primarily due to an early contract termination charge at Sabine Pass, higher transportation expenses, and costs associated with refinery shutdowns, partially offset by lower legal reserves.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Exploration expenses	$	196	$	113	$	405	$	199

Exploration expenses in the second quarter and the six-month period increased primarily due to higher charges for well write-offs.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Depreciation, depletion and amortization	$	3,700	$	4,522	$	7,354	$	8,808

Depreciation, depletion and amortization expenses for the second quarter and six-month period decreased primarily due to lower rates and lower production.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Taxes other than on income	$	1,563	$	1,566	$	3,565	$	2,986

Taxes other than on income for the second quarter were flat as higher taxes on production and excise taxes were offset by lower regulatory expenses. Taxes other than on income increased for the six-month period mainly due to higher taxes on production and excise taxes.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Interest and debt expense	$	129	$	185	$	265	$	383

Interest and debt expenses for the second quarter and the six-month period decreased mainly due to lower debt balances.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Other components of net periodic benefit costs	$	(13)	$	165	$	51	$	502

Other components of net periodic benefit costs for the second quarter and the six-month period decreased mainly due to lower pension settlement costs as fewer lump-sum pension distributions were made in the current year.


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
Income tax expense/(benefit)	$	4,288	$	1,328	$	7,065	$	2,107

The increase in income tax expense for the second quarter 2022 of $3.0 billion is consistent with the increase in total income before tax for the company of $11.6 billion.

U.S. income before tax increased from $1.7 billion in second quarter 2021 to $7.0 billion in second quarter 2022. This $5.3 billion increase in income was primarily driven by higher realizations and downstream margins. The increase in income had a direct impact on the company’s U.S. income tax resulting in an increase in tax expense of $1.2 billion between year-over-year periods, from $381 million in 2021 to $1.6 billion in 2022.

International income before tax increased from $2.7 billion in second quarter 2021 to $9.0 billion in second quarter 2022. This $6.2 billion increase in income was primarily driven by higher realizations and downstream margins. The increase in income primarily drove the $1.8 billion increase in international income tax expense between year-over-year periods, from $947 million in 2021 to $2.7 billion in 2022.

The company's increase in income tax expense for the first six months of 2022 of $5.0 billion was primarily due to the increase in the total before-tax income in 2022 of $18.5 billion.

U.S. income before tax increased between the six-month periods, from $1.6 billion in 2021 to $10.7 billion in 2022. This increase in income was primarily driven by higher realizations and downstream margins. The increase in income had a direct impact on the company’s U.S. income tax resulting in an increase in tax expense of $2.1 billion between the six-month periods, from $415 million in 2021 to $2.5 billion in 2022.

International income before tax increased for the six-month period, from $5.0 billion in 2021 to $14.3 billion in 2022. This increase in income is primarily due to higher realizations and downstream margins. The increase in income primarily drove the $2.9 billion increase in international income tax expense between year-over-year periods, from $1.7 billion in 2021 to $4.6 billion in 2022.

Additional information related to the company’s effective income tax rate is included in Note 10 Income Taxes to the Consolidated Financial Statements.

Selected Operating Data

The following table presents a comparison of selected operating data:


Selected Operating Data (1) (2)
	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
U.S. Upstream
Net crude oil and natural gas liquids production (MBPD)	888		857		884		829
Net natural gas production (MMCFPD)(3)	1,705		1,678		1,766		1,660
Net oil-equivalent production (MBOEPD)	1,172		1,136		1,178		1,106
Sales of natural gas (MMCFPD)	4,364		3,776		4,412		3,843
Sales of natural gas liquids (MBPD)	258		186		263		178
Revenue from net production
Liquids ($/Bbl)	$	88.71	$	54.08	$	82.72	$	51.01
Natural gas ($/MCF)	$	6.22	$	2.16	$	5.13	$	2.16
International Upstream
Net crude oil and natural gas liquids production (MBPD)(4)	799		990		828		1,008
Net natural gas production (MMCFPD)(3)	5,548		5,993		5,832		6,060
Net oil-equivalent production (MBOEPD)(4)	1,724		1,990		1,800		2,018
Sales of natural gas (MMCFPD)	4,537		4,756		4,705		5,092
Sales of natural gas liquids (MBPD)	83		106		90		91
Revenue from liftings
Liquids ($/Bbl)	$	102.30	$	62.12	$	97.74	$	58.93
Natural gas ($/MCF)	$	9.23	$	4.92	$	9.04	$	4.82
U.S. and International Upstream
Total net oil-equivalent production (MBOEPD)(4)	2,896		3,126		2,978		3,124
U.S. Downstream
Gasoline sales (MBPD)(5)	634		678		639		643
Other refined product sales (MBPD)	576		481		575		462
Total refined product sales (MBPD)	1,210		1,159		1,214		1,105
Sales of natural gas liquids (MBPD)	37		29		35		29
Refinery input (MBPD)	881		956		898		918
International Downstream
Gasoline sales (MBPD)(5)	281		269		281		263
Other refined product sales (MBPD)	673		671		683		670
Share of affiliate sales (MBPD)	383		342		368		341
Total refined product sales (MBPD)	1,337		1,282		1,332		1,274
Sales of natural gas liquids (MBPD)	141		74		130		75
Refinery input (MBPD)	634		580		626		559
(1) Includes company share of equity affiliates.
(2) MBPD — thousands of barrels per day; MMCFPD — millions of cubic feet per day; Bbl — Barrel; MCF — thousands of cubic feet; oil-equivalent gas conversion ratio is 6,000 cubic feet of natural gas = 1 barrel of crude oil; MBOEPD — thousands of barrels of oil-equivalent per day.
(3) Includes natural gas consumed in operations (MMCFPD):
United States	57		45		57		45
International	496		525		523		541
(4) Includes net production of synthetic oil:
Canada	39		54		39		57

(5) Includes branded and unbranded gasoline.

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities totaled $12.4 billion at June 30, 2022 and $5.7 billion at year-end 2021. Cash provided by operating activities in the first six months of 2022 was $21.8 billion, compared with $11.2 billion in the year-ago period. Cash provided by financing activities includes proceeds from shares issued for stock option exercises of $5.5 billion in the first six months of 2022, compared with $381 million in the year-ago period. Future cash proceeds from options exercises are expected to be lower. Cash capital and exploratory expenditures totaled $5.1 billion in the first six months of 2022, up $1.4 billion from the year-ago period. Proceeds and deposits related to asset sales and returns of investment totaled $1.3 billion and $1.1 billion, respectively, in the first six months of 2022, compared to $352 million and $17 million, respectively, in the year-ago period. The returns of investment in the first six months of 2022 were primarily from Angola LNG.

Dividends The company paid dividends of $5.5 billion to common stockholders during the first six months of 2022. In July 2022, the company declared a quarterly dividend of $1.42 per common share, payable in September 2022.

Debt and Finance Lease Liabilities Chevron’s total debt and finance lease liabilities were $26.2 billion at June 30, 2022, down from $31.4 billion at December 31, 2021 as the company repaid notes that matured during the period and early retired notes that were scheduled to mature in future periods, including $590 million associated with Renewable Energy Group, Inc.

The company has access to a commercial paper program as a financing source for working capital or other short-term needs. The outstanding balance for the company’s commercial paper program at June 30, 2022 was zero. The company’s debt and finance lease liabilities due within one year, consisting primarily of the current portion of long-term debt and redeemable long-term obligations, totaled $7.7 billion at June 30, 2022, and $8.0 billion at December 31, 2021. Of these amounts, $4.5 billion was reclassified to long-term at the end of June 30, 2022. At December 31, 2021, $7.8 billion was reclassified to long-term. At June 30, 2022, settlement of these obligations was not expected to require the use of working capital within one year, as the company had the intent and the ability, as evidenced by committed credit facilities, to refinance them on a long-term basis.

At June 30, 2022, the company had $10.1 billion in 364-day committed credit facilities with various major banks that enable the refinancing of short-term obligations on a long-term basis. The credit facilities allow the company to convert any amounts outstanding into a term loan for a period of up to one year. These facilities support commercial paper borrowing and can also be used for general corporate purposes. The company’s practice has been to continually replace expiring commitments with new commitments on substantially the same terms, maintaining levels management believes appropriate. Any borrowings under the facilities would be unsecured indebtedness at interest rates based on the London Interbank Offered Rate (LIBOR), or Secured Overnight Financing Rate (SOFR) when LIBOR has permanently or indefinitely ceased or is no longer representative, or an average of base lending rates published by specified banks and on terms reflecting the company’s strong credit rating. No borrowings were outstanding under these facilities at June 30, 2022. In addition, the company has an automatic shelf registration statement that expires in August 2023 for an unspecified amount of nonconvertible debt securities issued by Chevron Corporation or CUSA.

The major debt rating agencies routinely evaluate the company’s debt, and the company’s cost of borrowing can increase or decrease depending on these debt ratings. The company has outstanding bonds issued by Chevron Corporation, CUSA, Texaco Capital Inc and Noble Energy, Inc. Most of these securities are the obligations of, or guaranteed by, Chevron Corporation and are rated AA- by Standard and Poor’s Corporation (S&P) and Aa2 by Moody’s Investors Service (Moody’s). The company’s U.S. commercial paper is rated A-1+ by S&P and P-1 by Moody’s. All of these ratings denote high-quality, investment-grade securities.

The company’s future debt level is dependent primarily on results of operations, cash that may be generated from asset dispositions, the capital program, lending commitments to affiliates, and shareholder distributions. Based on its high-quality debt ratings, the company believes that it has substantial borrowing capacity to meet unanticipated cash requirements. During extended periods of low prices for crude oil and natural gas and narrow margins for refined products and commodity chemicals, the company has the flexibility to modify

capital spending plans, discontinue or curtail the stock repurchase program, sell assets, and increase borrowings to continue paying the common stock dividend. The company remains committed to retaining high-quality debt ratings.

Summarized Financial Information for Guarantee of Securities of Subsidiaries CUSA issued bonds that are fully and unconditionally guaranteed on an unsecured basis by Chevron Corporation (together, the “Obligor Group”). The tables below contain summary financial information for Chevron Corporation, as Guarantor, excluding its consolidated subsidiaries, and CUSA, as the issuer, excluding its consolidated subsidiaries. The summary financial information of the Obligor Group is presented on a combined basis, and transactions between the combined entities have been eliminated. Financial information for non-guarantor entities has been excluded.


	Six Months Ended June 30, 2022		Year Ended December 31, 2021
	(Millions of dollars) (unaudited)
Sales and other operating revenues	$	64,464	$	88,038
Sales and other operating revenues - related party	25,876		28,499
Total costs and other deductions	62,380		86,369
Total costs and other deductions - related party	21,860		28,277
Net income (loss)	$	9,355	$	5,515


	At June 30, 2022		At December 31, 2021
	(Millions of dollars) (unaudited)
Current assets	$	26,720	$	15,567
Current assets - related party	19,693		12,227
Other assets	48,862		48,461
Current liabilities	27,411		22,554
Current liabilities - related party	91,268		79,778
Other liabilities	28,697		32,825
Total net equity (deficit)	$	(52,101)	$	(58,902)

Common Stock Repurchase Program The Board of Directors authorized a stock repurchase program in 2019 with a maximum dollar limit of $25 billion and no set term limits. As of June 30, 2022, the company had purchased 85.5 million shares for $10.6 billion, resulting in $14.4 billion remaining under the authorized program. In the second quarter of 2022, the company repurchased 15.2 million shares for $2.5 billion. In July 2022, the company increased the top end of its annual share repurchase guidance range to $15 billion and is expected to repurchase $3.75 billion of shares during the third quarter of 2022.

Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by the company. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the company’s shares, general market and economic conditions, and other factors. The stock repurchase program does not obligate the company to acquire any particular amount of common stock, and it may be discontinued or resumed at any time.

Noncontrolling Interests The company had noncontrolling interests of $1.0 billion at June 30, 2022 and $873 million at December 31, 2021. Included within noncontrolling interests is $139 million at June 30, 2022 and $135 million at December 31, 2021 of redeemable noncontrolling interest.

Financial Ratios and Metrics


	At June 30, 2022		At December 31, 2021
Current Ratio (1)	1.3		1.3
Debt Ratio	14.6	%	18.4	%
Net Debt Ratio (2)	8.3	%	15.6	%

(1) At June 30, 2022, the book value of inventory was lower than replacement cost.

(2) Net Debt Ratio for June 30, 2022 is calculated as short-term debt of $3.2 billion plus long-term debt of $23.0 billion (together, “total debt”) less cash and cash equivalents of $12.0 billion and marketable securities of $341 million as a percentage of total debt less cash and cash equivalents and marketable securities, plus Chevron Corporation Stockholders’ Equity of $153.6 billion. For the December 31, 2021 calculation, please refer to page 47 of Chevron’s 2021 Annual Report on Form 10-K.


	Six Months Ended June 30
		2022		2021
	(Millions of dollars)
Net cash provided by operating activities		$	21,837	$	11,150
Less: Capital expenditures		(5,144)		(3,543)
Free Cash Flow		$	16,693	$	7,607

Pension Obligations Information related to pension plan contributions is included in Note 8 Employee Benefits to the Consolidated Financial Statements.

Capital and Exploratory Expenditures Capital and exploratory expenditures, including equity affiliates (Total C&E), is a key performance indicator for the company and provides a comprehensive view of its share of investment levels. This metric includes additions to fixed asset or investment accounts, or to exploration expense, for consolidated companies and our share of these expenditures by equity affiliates. Management uses this metric to manage allocation of capital across its entire portfolio, funding requirements and ultimately shareholder distributions.

Total C&E was $6.7 billion in the first six months of 2022, compared with $5.3 billion in the corresponding 2021 period. The amounts included the company’s share of affiliates’ expenditures of $1.5 billion in both the 2022 and 2021 periods, which did not require cash outlays by the company. Expenditures for upstream projects in the first six months of 2022 were $5.3 billion, representing 79 percent of the company-wide total.

The components of “Total C&E” are presented in the following table:


	Six Months Ended June 30
	2022		2021
	(Millions of dollars)




Capital expenditures	$	5,144	$	3,543
Expensed exploration expenditures	171		180
Assets acquired through finance lease obligations and other financing obligations	—		42
Payments for other assets and liabilities, net	(169)		(2)
Capital and exploratory expenditures, excluding equity affiliates	5,146		3,763
Company’s share of expenditures by equity affiliates	1,534		1,527
Capital and exploratory expenditures, including equity affiliates (Total C&E)	$	6,680	$	5,290


Total C&E by Major Operating Area
	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
	(Millions of dollars)
United States
Upstream	$	1,573	$	1,074	$	2,873	$	2,123
Downstream	884		264		1,130		506
All Other	86		31		128		83
Total United States	2,543		1,369		4,131		2,712
International
Upstream	1,296		1,237		2,414		2,296
Downstream	79		174		129		272
All Other	5		6		6		10
Total International	1,380		1,417		2,549		2,578
Worldwide	$	3,923	$	2,786	$	6,680	$	5,290

Acquisitions During second quarter 2022, the company acquired all outstanding shares of Renewable Energy Group, Inc. (REG) in an all-cash transaction valued at $3.15 billion, or $61.50 per share. The total cash outflow, net of cash acquired, was $2.86 billion.

Contingencies and Significant Litigation

Ecuador Information related to Ecuador matters is included in Note 11 Litigation under the heading “Ecuador.”

Climate Change Information related to climate change-related matters is included in Note 11 Litigation under the heading “Climate Change.”

Louisiana Information related to Louisiana coastal matters is included in Note 11 Litigation under the heading “Louisiana.”

Income Taxes Information related to income tax contingencies is included in Note 10 Income Taxes and in Note 12 Other Contingencies and Commitments under the heading “Income Taxes.”

Guarantees Information related to the company’s guarantees is included in Note 12 Other Contingencies and Commitments under the heading “Guarantees.”

Indemnifications Information related to indemnifications is included in Note 12 Other Contingencies and Commitments under the heading “Indemnifications.”

Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements Information related to the company’s long-term unconditional purchase obligations and commitments is included in Note 12 Other Contingencies and Commitments under the heading “Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements.”

Environmental Information related to environmental matters is included in Note 12 Other Contingencies and Commitments under the heading “Environmental.”

Other Contingencies Information related to the company’s other contingencies is included in Note 12 Other Contingencies and Commitments under the heading “Other Contingencies.”

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