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

Third Quarter 2022 Compared with Third Quarter 2021

Key Financial Results

Earnings by Business Segment
Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)(Millions of dollars)
Upstream
United States$3,398$1,962$10,004$4,349
International5,9093,17314,7946,314
Total Upstream9,3075,13524,79810,663
Downstream
United States1,2881,0834,2141,729
International1,2422272,169425
Total Downstream2,5301,3106,3832,154
Total Segment Earnings11,8376,44531,18112,817
All Other(606)(334)(2,069)(2,247)
Net Income (Loss) Attributable to Chevron Corporation (1) (2)$11,231$6,111$29,112$10,570
(1) Includes foreign currency effects.$624$305$1,074$346
(2) Income (loss) net of tax; also referred to as “earnings” in the discussions that follow.

Net income attributable to Chevron Corporation for third quarter 2022 was $11.2 billion ($5.78 per share — diluted), compared with $6.1 billion ($3.19 per share — diluted) in the third quarter of 2021. The net income attributable to Chevron Corporation for the first nine months of 2022 was $29.1 billion ($14.95 per share — diluted), compared with $10.6 billion ($5.51 per share — diluted) in the first nine months of 2021.

Upstream earnings in third quarter 2022 were $9.3 billion compared with $5.1 billion in the corresponding 2021 period. The increase was mainly due to higher realizations. Earnings for the first nine months of 2022 were $24.8 billion compared with $10.7 billion in the corresponding 2021 period. The increase was mainly due to higher realizations and favorable foreign currency effects, partially offset by higher operating expenses largely due to an early contract termination at Sabine Pass.

Downstream earnings in third quarter 2022 were $2.5 billion compared with $1.3 billion in the corresponding 2021 period. The increase was mainly due to higher margins on refined product sales, partially offset by higher operating expenses largely associated with planned turnarounds and lower earnings from the 50 percent-owned Chevron Phillips Chemical Company. Earnings for the first nine months of 2022 were $6.4 billion compared with $2.2 billion 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 third quarter and first nine 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 safely 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, such as recent legislative and regulatory activity in California including the Advanced Clean Cars II 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 Inflation Reduction Act (“IRA”), enacted in the United States on August 16, 2022, imposes several new taxes that will be effective in 2023, including a 15 percent minimum tax on book income and a 1 percent excise tax on stock repurchases. The IRA also implements various incentives for lower carbon activities, including carbon capture and storage and the production of hydrogen and sustainable aviation fuel, and extends the federal biodiesel mixture excise tax credit through December 31, 2024. We are continuing to evaluate the impact that the IRA and any associated published and forthcoming Internal Revenue Service implementation guidance may have on our future results of operations.

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 TCO, Karachaganak and other producing fields in Kazakhstan. Two of the three offshore loading moorings at the CPC marine terminal were taken out of service during August for equipment repairs identified during normal maintenance. Repairs are currently underway and are expected to be completed in fourth quarter 2022, assuming favorable weather conditions. CPC is capable of operating at approximately 70 percent of capacity with one single point mooring facility in

service. Production at TCO has not been curtailed since April 23, 2022, given third quarter turnaround activity at TCO and at other regional producers that ship through CPC. However, there is a risk that production from TCO could be curtailed in the future.

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.

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. Supply chain disruptions continue to limit the availability and deliverability of some inputs throughout the industry. In the near term, slowing economic activity could moderate inflationary pressures by reducing supplier backlogs and mitigating supply chain disruptions. The United States rig count was relatively flat in the third quarter of 2022 compared to the last quarter, while the international rig count was up, driven by onshore gas-directed drilling in Europe.

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. Chevron utilizes contracts with various pricing mechanisms, so there may be a lag before the company’s costs reflect the changes in market trends.

cvx-20220930_g1.jpg

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 third quarter of 2022, Brent averaged $101 per barrel and ended October at about $93. The WTI price averaged $68 per barrel for the full-year 2021. During the third quarter of 2022, WTI averaged $92 per barrel and ended October at about $87. The majority of the company’s equity crude production is priced based on the Brent and WTI benchmarks. Crude prices declined in the third quarter of 2022 driven by slowing demand due to COVID-19 lockdowns in China, a global macroeconomic slowdown, the release of U.S. Strategic Petroleum Reserves that boosted supply and a less-than-expected drop in Russian crude exports. However, in early October 2022, crude prices increased due to the announced OPEC+ production cuts. (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 U.S., prices at

Henry Hub averaged $6.61 per thousand cubic feet (MCF) for the first nine months of 2022, compared with $3.52 during the first nine months of 2021. At the end of October 2022, the Henry Hub spot price was $4.95 per MCF.

Outside the U.S., 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 spot LNG market. International natural gas realizations increased to $9.56 per MCF during the first nine months of 2022, compared with $5.30 per MCF in the same period last year mainly due to higher LNG prices in Europe and Asia. (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 nine months of 2022 averaged 3.00 million barrels per day, a decrease of 3 percent from the first nine 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 nine months of 2022 occurred in the 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, lower industry refinery capacity 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 may reduce 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 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.

Noteworthy Developments

Certain noteworthy developments in recent months included the following:

  • Australia – Received permits, as part of joint ventures, to assess carbon storage for three blocks totaling nearly 7.8 million acres in offshore Australia.

  • Canada – Invested in Aurora Hydrogen, a company developing emission-free hydrogen production technology.

  • Germany – Broke ground on a lower carbon feedstock expansion project at the company’s Emden bio-refinery.

  • Japan – Announced a joint collaboration agreement with Mitsui Oil Exploration Co., Ltd. to explore the technical and commercial feasibility of advanced geothermal power generation.

  • Namibia – Entered Namibia by acquiring an 80 percent working interest in a Deepwater oil and gas exploration lease.

  • Republic of Congo – Received final approval for extension of the Haute Mer production sharing contract to 2040.

  • Singapore – Signed a memorandum of understanding to form a consortium that aims to evaluate and advance development of large-scale carbon capture and storage solutions and integrated infrastructure.

  • Singapore – Delivered first shipment of offset-paired liquefied natural gas cargo.

  • United States – Invested in lower carbon technologies, including TAE Technologies, Inc. (fusion power) and Zero Emissions Industries (hydrogen fuel cell for maritime industry).

  • United States – Approved a project to increase light crude oil processing capacity by 15 percent at the company’s Pasadena, Texas refinery.

  • United States – Delivered renewable natural gas for the first time from the Brightmark RNG Holdings LLC joint venture project in South Dakota.

  • United States – Broke ground on a joint venture solar energy project to generate renewable energy for the company’s oil and gas operations in the Permian Basin in Texas and New Mexico.

  • United States – Awarded 34 exploration leases in the Gulf of Mexico.

  • United States – Announced investment in a new joint venture with California Bioenergy LLC to build infrastructure for the company’s dairy biomethane projects in California.

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 September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
U.S. Upstream Earnings$3,398$1,962$10,004$4,349

U.S. upstream reported earnings of $3.4 billion in third quarter 2022, compared with $2.0 billion from a year earlier. The increase was primarily due to higher realizations of $1.6 billion and higher volumes of $200 million, partially offset by the absence of third quarter 2021 asset sale gains of $200 million.

U.S. upstream reported earnings of $10.0 billion in the first nine months of 2022, compared with $4.3 billion from a year earlier. The increase was primarily due to higher realizations of $6.4 billion and higher sales volumes of $500 million, partially offset by higher operating expenses of $1.0 billion 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 third quarter 2022 was $76, compared with $58 a year earlier. The average realization per barrel for U.S. crude oil and natural gas liquids in the first nine months of 2022 was $80, compared with $53 a year earlier. The average natural gas realization in third quarter 2022 was $7.05 per thousand cubic feet, compared with $3.25 in the 2021 period. The average natural gas realization in the first nine months of 2022 was $5.76 per thousand cubic feet, compared with $2.53 in the 2021 period.

Net oil-equivalent production of 1.18 million barrels per day in third quarter 2022 was up 49,000 barrels per day, or 4 percent, from a year earlier. The quarterly increase was primarily due to the absence of third quarter 2021 weather related impacts in the Gulf of Mexico and net production increases in the Permian Basin, partially offset by impacts from the sale of Eagle Ford assets. Net oil-equivalent production of 1.18 million barrels per day in the first nine months of 2022 was up 64,000 barrels per day, or 6 percent, from a year earlier. The year-to-date increase was primarily due to net production increases in the Permian Basin.

The net liquids component of oil-equivalent production of 891,000 barrels per day in third quarter 2022 was up 6 percent from the corresponding 2021 period. The net liquids component of oil-equivalent production of 886,000 barrels per day in the first nine months of 2022 was up 6 percent from the corresponding 2021 period. Net natural gas production of 1.71 billion cubic feet per day in third quarter 2022 was in line with the 2021 comparative period. Net natural gas production was 1.75 billion cubic feet per day in the first nine months of 2022, an increase of 4 percent from the 2021 period.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
International Upstream Earnings*$5,909$3,173$14,794$6,314
* Includes foreign currency effects$440$285$899$311

International upstream operations earned $5.9 billion in third quarter 2022, compared with $3.2 billion a year ago. The increase in earnings was primarily due to higher realizations of $2.7 billion, partially offset by lower sales volumes of $280 million. Foreign currency effects had a favorable impact on earnings of $155 million between periods.

International upstream operations earned $14.8 billion in the first nine months of 2022, compared with $6.3 billion a year ago. The increase in earnings was primarily due to higher realizations of $8.2 billion and

asset sale gains of $200 million, partially offset by lower sales volumes of $1.1 billion. Foreign currency effects had a favorable impact on earnings of $588 million between periods.

The average sales price for crude oil and natural gas liquids in third quarter 2022 was $89 per barrel, up from $68 a year earlier. The average sales price for crude oil and natural gas liquids in the first nine months of 2022 was $95 per barrel, up from $62 a year earlier. The average sales price of natural gas was $10.36 per thousand cubic feet in third quarter 2022, compared with $6.28 in the 2021 period. The average sales price of natural gas was $9.56 per thousand cubic feet in the first nine months of 2022, compared with $5.30 in the 2021 period.

Net oil-equivalent production of 1.85 million barrels per day in third quarter 2022 was down 56,000 barrels per day from third quarter 2021. Net oil-equivalent production of 1.82 million barrels per day in the first nine months of 2022 was down 163,000 barrels per day, or 8 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, partially offset by the absence of third quarter 2021 planned turnaround impacts at TCO.

The net liquids component of oil-equivalent production of 816,000 barrels per day in third quarter 2022 decreased 11 percent from the 2021 period. The net liquids component of oil-equivalent production of 824,000 barrels per day in the first nine months of 2022 decreased 16 percent from the 2021 period. Net natural gas production of 6.21 billion cubic feet per day in third quarter 2022 increased 4 percent from the 2021 period. Net natural gas production of 5.96 billion cubic feet per day in the first nine months of 2022 decreased 1 percent from the 2021 period.

Downstream

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
U.S. Downstream Earnings$1,288$1,083$4,214$1,729

U.S. downstream reported earnings of $1.3 billion in third quarter 2022, compared with $1.1 billion a year earlier. The increase was mainly due to higher margins on refined product sales of $940 million, partially offset by lower earnings from the 50 percent-owned Chevron Phillips Chemical Company of $390 million and higher operating expenses of $360 million largely associated with planned turnarounds.

U.S. downstream reported earnings of $4.2 billion in the first nine months of 2022, compared with $1.7 billion a year earlier. The increase was mainly due to higher margins on refined product sales of $3.6 billion, partially offset by higher operating expenses of $660 million and lower earnings from the 50 percent-owned Chevron Phillips Chemical Company of $480 million.

Refinery crude oil input in third quarter 2022 decreased 13 percent to 779,000 barrels per day and for the first nine months of 2022, crude oil input decreased 6 percent to 858,000 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 third quarter 2022 were up 5 percent to 1.25 million barrels per day and for the first nine months of 2022, refined product sales were up 8 percent to 1.23 million barrels per day from the corresponding 2021 periods. The increase for both quarterly and nine-month periods was mainly due to higher renewable fuel sales following the Renewable Energy Group, Inc. acquisition and higher jet fuel demand as travel restrictions associated with the COVID-19 pandemic continue to ease.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
International Downstream Earnings*$1,242$227$2,169$425
* Includes foreign currency effects$179$123$347$183

International downstream reported earnings of $1.2 billion in third quarter 2022, compared with $227 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 $56 million between periods.

International downstream reported earnings of $2.2 billion in the first nine months of 2022, compared with $425 million a year earlier. The increase in earnings was mainly due to higher margins on refined product sales of $2.0 billion and a favorable swing in foreign currency effects of $164 million between periods, partially offset by higher operating expenses of $460 million.

Refinery crude oil input of 651,000 barrels per day in third quarter 2022 increased 11 percent from the year-ago period. For the first nine months of 2022, crude oil input was 635,000 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 third quarter 2022 were up 4 percent to 1.44 million barrels per day and for the first nine months of 2022, refined product sales were up 4 percent to 1.37 million barrels per day from the corresponding 2021 periods. The increase for both quarterly and nine-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 September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Earnings/(Charges)*$(606)$(334)$(2,069)$(2,247)
* Includes foreign currency effects$5$(103)$(172)$(148)

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 third quarter 2022 were $606 million, compared to $334 million a year earlier. The increase in net charges between periods was mainly due to the absence of third quarter 2021 favorable tax items and higher current quarter pension settlement expenses, partially offset by higher interest income from higher cash balances and lower debt interest expenses. Foreign currency effects decreased net charges by $108 million between periods.

Net charges in the first nine months of 2022 were $2.1 billion, compared to $2.2 billion a year earlier. The decrease in net charges between periods was mainly due to lower employee benefit costs, pension settlement expense, and interest expense, partially offset by the absence of 2021 favorable tax items and an unfavorable swing of $24 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 September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Sales and other operating revenues$63,508$42,552$181,194$109,745

Sales and other operating revenues increased $21.0 billion for the third quarter and $71.4 billion for the nine-month period mainly due to higher refined product, crude oil and natural gas prices.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Income from equity affiliates$2,410$1,647$6,962$4,000

Income from equity affiliates in the third quarter and nine-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 September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Other income (loss)$726$511$1,623$591

Other income for the third quarter increased due to a favorable swing in foreign currency effects and higher interest income, partially offset by lower gains on asset sales. Other income for the nine-month period increased due to a favorable swing in foreign currency effects, higher gains on asset sales and higher interest income.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Purchased crude oil and products$38,090$23,834$110,742$62,031

Purchased crude oil and products increased $14.3 billion for the third quarter and $48.7 billion for the nine-month period primarily due to higher crude oil, natural gas and refined product prices.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Operating, selling, general and administrative expenses$7,385$6,010$21,171$17,962

Operating, selling, general and administrative expenses in the third quarter increased $1.4 billion primarily due to higher transportation expenses, costs associated with planned refinery turnarounds, and higher employee benefit expenses. Operating, selling, general and administrative expenses in the nine-month period increased $3.2 billion primarily due to higher transportation expenses, an early contract termination charge at Sabine Pass, and costs associated with planned refinery turnarounds.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Exploration expenses$116$158$521$357

Exploration expenses in the third quarter decreased primarily due to lower charges for well write-offs. Exploration expenses for the nine-month period increased primarily due to higher charges for well write-offs.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Depreciation, depletion and amortization$4,201$4,304$11,555$13,112

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

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Taxes other than on income$1,707$2,075$5,272$5,061

Taxes other than on income for the third quarter decreased mainly due to lower excise taxes, partially offset by higher taxes on production and property taxes. Taxes other than on income in the nine-month period were higher mainly due to higher taxes on production and property taxes, partially offset by lower excise taxes.

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Interest and debt expense$128$174$393$557

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

Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Other components of net periodic benefit costs$208$100$259$602

Other components of net periodic benefit costs for the third quarter increased primarily due to higher pension settlement costs. Other components of net periodic benefit costs for the nine-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 September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
Income tax expense/(benefit)$3,571$1,940$10,636$4,047

The increase in income tax expense for third quarter 2022 of $1.6 billion is consistent with the increase in total income before tax for the company of $6.8 billion.

U.S. income before tax increased from $3.0 billion in third quarter 2021 to $5.3 billion in third quarter 2022. This $2.3 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 $0.9 billion between year-over-year periods, from $355 million in 2021 to $1.2 billion in 2022.

International income before tax increased from $5.0 billion in third quarter 2021 to $9.5 billion in third quarter 2022. This $4.5 billion increase in income was primarily driven by higher realizations and downstream margins. The increase in income primarily drove the $0.8 billion increase in international income tax expense between year-over-year periods, from $1.6 billion in 2021 to $2.4 billion in 2022.

The company's increase in income tax expense for the first nine months of 2022 of $6.6 billion was primarily due to the increase in the total before-tax income in 2022 of $25.2 billion.

U.S. income before tax increased between the nine-month periods, from $4.6 billion in 2021 to $16.0 billion in 2022. This $11.4 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 $2.9 billion between the nine-month periods, from $770 million in 2021 to $3.7 billion in 2022.

International income before tax increased for the nine-month period, from $10.0 billion in 2021 to $23.8 billion in 2022. This $13.8 billion increase in income was primarily due to higher realizations and downstream margins. The increase in income primarily drove the $3.7 billion increase in international income tax expense between year-over-year periods, from $3.3 billion in 2021 to $6.9 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 September 30Nine Months Ended September 30
2022202120222021
U.S. Upstream
Net crude oil and natural gas liquids production (MBPD)891842886834
Net natural gas production (MMCFPD)(3)1,7081,7081,7471,677
Net oil-equivalent production (MBOEPD)1,1761,1271,1771,113
Sales of natural gas (MMCFPD)4,4644,0764,4303,922
Sales of natural gas liquids (MBPD)281188270181
Revenue from net production
Liquids ($/Bbl)$75.73$57.81$80.35$53.33
Natural gas ($/MCF)$7.05$3.25$5.76$2.53
International Upstream
Net crude oil and natural gas liquids production (MBPD)(4)816915824976
Net natural gas production (MMCFPD)(3)6,2125,9525,9606,023
Net oil-equivalent production (MBOEPD)(4)1,8511,9071,8171,980
Sales of natural gas (MMCFPD)7,9905,4505,8125,212
Sales of natural gas liquids (MBPD)104849589
Revenue from liftings
Liquids ($/Bbl)$89.14$67.92$94.95$61.77
Natural gas ($/MCF)$10.36$6.28$9.56$5.30
U.S. and International Upstream
Total net oil-equivalent production (MBOEPD)(4)3,0273,0342,9953,093
U.S. Downstream
Gasoline sales (MBPD)(5)639671639652
Other refined product sales (MBPD)609517587481
Total refined product sales (MBPD)1,2481,1881,2261,133
Sales of natural gas liquids (MBPD)21232927
Refinery input (MBPD)779895858911
International Downstream
Gasoline sales (MBPD)(5)306314289280
Other refined product sales (MBPD)732717700686
Share of affiliate sales (MBPD)399355378346
Total refined product sales (MBPD)1,4371,3861,3671,312
Sales of natural gas liquids (MBPD)12312912897
Refinery input (MBPD)651584635567
(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 States50475546
International518540521547
(4) Includes net production of synthetic oil:
Canada50514355
(5) Includes branded and unbranded gasoline.

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities totaled $15.4 billion at September 30, 2022 and $5.7 billion at year-end 2021. Cash provided by operating activities in the first nine months of 2022 was $37.1 billion, compared with $19.7 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 nine months of 2022, compared with $388 million in the year-ago period. Future cash proceeds from options exercises are expected to be lower. Capital and exploratory expenditures totaled $8.2 billion in the first nine months of 2022, up $2.4 billion from the year-ago period. Proceeds and deposits related to asset sales and returns of investment totaled $1.4 billion and $1.1 billion, respectively, in the first nine months of 2022, compared to $563 million and $23 million, respectively, in the year-ago period. The returns of investment in the first nine months of 2022 were primarily from Angola LNG. As of third quarter 2022, Angola LNG distributions were, and are expected to continue to be, reflected in cash flow from operations.

Dividends The company paid dividends of $8.3 billion to common stockholders during the first nine months of 2022. In October 2022, the company declared a quarterly dividend of $1.42 per common share, payable in December 2022.

Debt and Finance Lease Liabilities Chevron’s total debt and finance lease liabilities were $23.6 billion at September 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.

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 September 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 $6.2 billion at September 30, 2022, and $8.0 billion at December 31, 2021. Of these amounts, $4.0 billion was reclassified to long-term at the end of September 30, 2022. At December 31, 2021, $7.8 billion was reclassified to long-term. At September 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 September 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 September 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.

Nine Months Ended September 30, 2022Year Ended December 31, 2021
(Millions of dollars) (unaudited)
Sales and other operating revenues$98,088$88,038
Sales and other operating revenues - related party39,61028,499
Total costs and other deductions93,84686,369
Total costs and other deductions - related party33,96228,277
Net income (loss)$13,084$5,515
At September 30, 2022At December 31, 2021
(Millions of dollars) (unaudited)
Current assets$27,814$15,567
Current assets - related party24,99612,227
Other assets49,27148,461
Current liabilities24,19522,554
Current liabilities - related party105,00279,778
Other liabilities27,64132,825
Total net equity (deficit)$(54,757)$(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 September 30, 2022, the company had purchased 109.9 million shares for $14.3 billion, resulting in $10.7 billion remaining under the authorized program. In the third quarter of 2022, the company repurchased 24.3 million shares for $3.75 billion. The company currently expects to repurchase $3.75 billion of shares during the fourth 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 $947 million at September 30, 2022 and $873 million at December 31, 2021. Included within noncontrolling interests is $142 million at September 30, 2022 and $135 million at December 31, 2021 of redeemable noncontrolling interest.

Financial Ratios and Metrics

At September 30, 2022At December 31, 2021
Current Ratio (1)1.41.3
Debt Ratio13.0%18.4%
Net Debt Ratio (2)4.9%15.6%

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

(2) Net Debt Ratio for September 30, 2022 is calculated as short-term debt of $2.2 billion plus long-term debt of $21.4 billion (together, “total debt”) less cash and cash equivalents of $15.2 billion and marketable securities of $267 million as a percentage of total debt less cash and cash equivalents and marketable securities, plus Chevron Corporation Stockholders’ Equity of $158.7 billion. For the December 31, 2021 calculation, please refer to page 47 of Chevron’s 2021 Annual Report on Form 10-K.

Nine Months Ended September 30
20222021
(Millions of dollars)
Net cash provided by operating activities$37,104$19,729
Less: Capital expenditures(8,139)(5,450)
Free Cash Flow$28,965$14,279

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 (C&E) is a key performance indicator and provides the company’s investment level in its consolidated companies. This metric includes additions to fixed asset or investment accounts along with exploration expense for its consolidated companies. Management uses this metric along with Affiliate C&E (as defined below) to manage allocation of capital across the company’s entire portfolio, funding requirements and ultimately shareholder distributions.

Equity affiliate capital and exploratory expenditures (Affiliate C&E) is also a key performance indicator that provides the company’s share of investments in its significant equity affiliate companies. This metric includes additions to fixed asset and investment accounts along with exploration expense in the equity affiliate companies’ financial statements. Management uses this metric to assess possible funding needs and/or shareholder distribution capacity of the company’s equity affiliate companies. Together with C&E, management also uses Affiliate C&E to manage allocation of capital across the company’s entire portfolio, funding requirements and ultimately shareholder distributions.

C&E was $8.2 billion in the first nine months of 2022, compared with $5.8 billion in the corresponding 2021 period. Additionally, Affiliate C&E, which did not require cash outlays by the company, was $2.4 billion in the first nine months of 2022 relative to $2.3 billion in first nine months of 2021.

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

Nine Months Ended September 30
20222021
(Millions of dollars)
Capital expenditures$8,139$5,450
Expensed exploration expenditures266302
Assets acquired through finance lease obligations and other financing obligations349
Payments for other assets and liabilities, net(169)1
Capital and exploratory expenditures (C&E)$8,239$5,802
Affiliate capital and exploratory expenditures (Affiliate C&E)$2,380$2,258
Capital and Exploratory Expenditures (C&E) by Business Segment
Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
United States
Upstream$1,855$1,135$4,728$3,256
Downstream2822251,120567
All Other5453182136
Total United States2,1911,4136,0303,959
International
Upstream8525832,0871,717
Downstream47$40113113
All Other33913
Total International9026262,2091,843
C&E$3,093$2,039$8,239$5,802
Affiliate Capital and Exploratory Expenditures (Affiliate C&E) by Business Segment
Three Months Ended September 30Nine Months Ended September 30
2022202120222021
(Millions of dollars)
United States
Upstream$—$—$—$2
Downstream21570507234
Total United States21570507236
International
Upstream5935961,7721,758
Downstream3865101264
Total International6316611,8732,022
Affiliate C&E$846$731$2,380$2,258

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 and is not included in the company's C&E.

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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