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 2023 Compared with Second Quarter 2022

Key Financial Results


Earnings by Business Segment
	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)				(Millions of dollars)
Upstream
United States	$	1,640	$	3,367	$	3,421	$	6,605
International	3,296		5,191		6,676		8,887
Total Upstream	4,936		8,558		10,097		15,492
Downstream
United States	1,081		2,440		2,058		2,926
International	426		1,083		1,249		928
Total Downstream	1,507		3,523		3,307		3,854
Total Segment Earnings	6,443		12,081		13,404		19,346
All Other	(433)		(459)		(820)		(1,465)
Net Income (Loss) Attributable to Chevron Corporation (1) (2)	$	6,010	$	11,622	$	12,584	$	17,881

(1) Includes foreign currency effects.	$	10	$	668	$	(30)	$	450
(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 2023 was $6.0 billion ($3.20 per share — diluted), compared with $11.6 billion ($5.95 per share — diluted) in the second quarter of 2022. The net income attributable to Chevron Corporation for the first six months of 2023 was $12.6 billion ($6.66 per share — diluted), compared with $17.9 billion ($9.17 per share — diluted) in the first six months of 2022.

Upstream earnings in second quarter 2023 were $4.9 billion compared with $8.6 billion in the corresponding 2022 period. The decrease was mainly due to lower realizations and lower foreign currency effects, partially offset by the absence of a 2022 early contract termination at Sabine Pass, higher sales volumes and favorable tax items. Earnings for the first six months of 2023 were $10.1 billion compared with $15.5 billion a year earlier. The decrease was mainly due to lower realizations and unfavorable foreign currency effects, partially offset by lower operating expenses and higher sales volumes.

Downstream earnings in second quarter 2023 were $1.5 billion compared with $3.5 billion in the corresponding 2022 period. The decrease was mainly due to lower margins on refined product sales, higher operating expenses and lower foreign currency effects. Earnings for the first six months of 2023 were $3.3 billion compared with $3.9 billion in the corresponding 2022 period. The decrease was mainly due to higher operating expenses, lower earnings from the 50 percent-owned Chevron Phillips Chemical Company (CPChem) and lower foreign currency effects, partially offset by higher margins on refined product sales.

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 2023 versus the same periods in 2022.

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, 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 expenditures, along with other measures intended to improve financial performance.

Governments, companies, communities, and other stakeholders are increasingly supporting efforts to address climate change. International initiatives and national, regional and state legislation and regulations that aim to directly or indirectly reduce GHG emissions are in various stages of design, adoption, and implementation. These policies and programs, 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 jurisdiction-specific policies and programs 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 or other requirements affecting ESG standards or other disclosures, and evolving standards for tracking and reporting on emissions and emission reductions and removals.

Significant uncertainty remains as to the pace and extent to which the transition to a lower carbon future will progress, which is dependent, in part, on further advancements and changes in policy, technology, and customer and consumer preferences. The level of expenditure required to comply with new or potential climate change-related laws and regulations and the amount of additional investments needed 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, available technology options, customer and consumer preferences, the company’s activities, 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 for many years to come.

Chevron supports the Paris Agreement’s global approach to governments addressing climate change and continues to take actions to help lower the carbon intensity of its operations while continuing to meet the demand for energy. Chevron believes that broad, market-based mechanisms are the most efficient approach to addressing GHG emission reductions. 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 electric vehicle and renewable fuel penetration, energy efficiency standards, and demand response to oil and natural gas prices.

The company will continue to develop oil and gas resources to meet customers’ and consumers’ 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 and consumer 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, offsets, and other emerging technologies. 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 33 through 34 of the company’s 2022 Annual Report on Form 10-K.

Income Taxes 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 9 Income Taxes to the Consolidated Financial Statements.

Supply Chain and Inflation Impacts The company is actively managing its contracting, procurement, and supply chain activities to effectively manage costs and facilitate supply chain resiliency and continuity in support of the company’s operational goals. Third party costs for capital and operating expenses can be subject to external factors beyond the company’s control including, but not limited to: severe weather or civil unrest, delays in construction, global and local supply chain distribution issues, 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, which may result in a lag before the company’s costs reflect changes in market trends.

While macroeconomic inflation is easing, the trends in the cost of goods and services vary by spend category. The labor market remains tight, and suppliers are passing along wage rate increases for labor intensive operations. Lead times for key capital equipment remain long. Prices have declined for categories that are indexed to broad economic activity such as steel pipe, chemicals, ocean freight and trucking. However, availability of specialized drilling rigs, supply vessels and equipment to perform hydraulic fracturing remains under pressure.

Other Impacts 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. In addition, some assets are sold along with their related liabilities, such as asset retirement obligations. In certain instances, such transferred obligations have and may in the future revert back to the company and result in losses that could be significant.

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 commodity prices and downstream margins. Management takes these developments into account in the conduct of daily operations and for business planning.

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, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of these factors could also inhibit the company’s production 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, the pace and extent of the energy transition, and changes in tax, environmental and other applicable laws and regulations.

Chevron has interests in Venezuelan assets operated by independent affiliates. Chevron has been conducting limited activities in Venezuela consistent with the authorization provided pursuant to general licenses issued by the United States government. In fourth quarter 2022, Chevron received License 41 from the United States government, enabling the company to resume activity in Venezuela subject to certain limitations. The financial results for Chevron’s business in Venezuela are being recorded as non-equity investments since

2020, where income is only recognized when cash is received and production and reserves are not included in the company’s results. Crude oil liftings in Venezuela started in first quarter 2023, which has and could continue to result in positive impacts to the company’s results.

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. An adverse effect on Caspian Pipeline Consortium (CPC) operations could have a negative impact on the Tengiz field in Kazakhstan and the company’s results of operations and 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.

beo chart 2Q23.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 $101 per barrel for the full-year 2022. During the second quarter of 2023, Brent averaged $78 per barrel and ended July at about $86. The WTI price averaged $95 per barrel for the full-year 2022. During the second quarter of 2023, WTI averaged $74 per barrel and ended July at about $82. The majority of the company’s equity crude production is priced based on the Brent and WTI benchmarks. Crude prices decreased slightly during the quarter as crude supply outpaced demand growth. Crude prices have stabilized in July 2023 following oil inventory draws associated with OPEC+ production cuts that were announced during the second quarter of 2023. (See page 33 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 regional and local markets. In the U.S., prices at Henry Hub averaged $2.45 per thousand cubic feet (MCF) for the first six months of 2023, compared with $5.92 during the first six months of 2022. High levels of inventory have resulted in lower prices at Henry Hub this year. At the end of July 2023, the Henry Hub spot price was $2.52 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 averaged $8.25 per MCF during the first six months of 2023, compared with $9.04 per MCF in the same period last year. (See page 33 for the company’s average natural gas sales prices for the U.S. and international regions.)

Production The company’s worldwide net oil-equivalent production in the first six months of 2023 averaged 2.97 million barrels per day, slightly lower than the first six months of 2022 primarily due to the end of the Erawan concession in Thailand, partially offset by production growth in the Permian Basin and lower turnaround impacts in Australia. About 27 percent of the company’s net oil-equivalent production in the first

six months of 2023 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 the “Results of Operations” section on page 27 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.

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.

Refer to the “Results of Operations” section beginning on page 28 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.

Refer to "Cautionary Statements Relevant to Forward-Looking Information" on page 2 and to “Risk Factors” on pages 20 through 26 of the company’s 2022 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.

Noteworthy Developments

Certain noteworthy developments in recent months included the following:

Angola - Received approvals to extend Block 0 concession through 2050.
Australia - Achieved first natural gas production from the Gorgon Stage two development, supporting long-term energy supply in the Asia-Pacific region.
Israel - Reached final investment decision with partners to construct a third gathering pipeline that is expected to increase production capacity from approximately 1.2 to nearly 1.4 billion cubic feet per day at the Leviathan reservoir.
Japan - Announced agreements to conduct pilot tests on advanced closed loop geothermal technology.
United States - Announced an agreement to acquire PDC Energy, Inc. in an all-stock transaction, with closing expected in August 2023.

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
	2023		2022		2023		2022
	(Millions of dollars)
U.S. Upstream Earnings	$	1,640	$	3,367	$	3,421	$	6,605

U.S. upstream reported earnings of $1.6 billion in second quarter 2023, compared with $3.4 billion from a year earlier. The decrease was primarily due to lower realizations of $2.6 billion, partially offset by lower operating expenses due to the absence of a 2022 early contract termination at Sabine Pass of $600 million and higher sales volumes of $170 million.

U.S. upstream reported earnings of $3.4 billion in the first six months of 2023, compared with $6.6 billion from a year earlier. The decrease was primarily due to lower realizations of $3.8 billion, partially offset by lower operating expenses of $500 million mainly due to the absence of a 2022 early contract termination at Sabine Pass and higher sales volumes of $110 million.

The average realization per barrel for U.S. crude oil and natural gas liquids in second quarter 2023 was $56, compared with $89 a year earlier. The average realization per barrel for U.S. crude oil and natural gas liquids in the first six months of 2023 was $58, compared with $83 a year earlier. The average natural gas realization in second quarter 2023 was $1.23 per thousand cubic feet, compared with $6.22 in the 2022 period. The average natural gas realization in the first six months of 2023 was $1.88 per thousand cubic feet, compared with $5.13 in the 2022 period.

Net oil-equivalent production of 1.22 million barrels per day in second quarter 2023 was up 47,000 barrels per day, or 4 percent, from a year earlier. The increase was primarily due to growth in the Permian Basin. Net oil-equivalent production of 1.19 million barrels per day in the first six months of 2023 was up 15,000 barrels per day, or 1 percent, from a year earlier. The increase was primarily due to growth in the Permian Basin, partially offset by the sale of Eagle Ford assets.

The net liquids component of oil-equivalent production of 916,000 barrels per day in second quarter 2023 was up 3 percent from the corresponding 2022 period. The net liquids component of oil-equivalent production of 896,000 barrels per day in the first six months of 2023 was up 1 percent from the corresponding 2022 period. Net natural gas production of 1.82 billion cubic feet per day in second quarter 2023 increased 7 percent from the 2022 period. Net natural gas production was 1.78 billion cubic feet per day in the first six months of 2023, an increase of 1 percent from the 2022 period.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
International Upstream Earnings*	$	3,296	$	5,191	$	6,676	$	8,887

* Includes foreign currency effects	$	10	$	603	$	(46)	$	459

International upstream reported earnings of $3.3 billion in second quarter 2023, compared with $5.2 billion a year ago. The decrease in earnings was primarily due to lower realizations of $2.1 billion, partially offset by favorable tax items of $450 million and higher sales volumes of $240 million. Foreign currency effects had an unfavorable impact on earnings of $593 million between periods.

International upstream operations earned $6.7 billion in the first six months of 2023, compared with $8.9 billion a year ago. The decrease in earnings was primarily due to lower realizations of $2.4 billion, partially

offset by lower opex of $300 million and higher sales volumes of $100 million. Foreign currency effects had an unfavorable impact on earnings of $505 million between periods.

The average sales price for crude oil and natural gas liquids in second quarter 2023 was $68 per barrel, down from $102 a year earlier. The average sales price for crude oil and natural gas liquids in the first six months of 2023 was $68 per barrel, down from $98 a year earlier. The average sales price of natural gas was $7.50 per thousand cubic feet in second quarter 2023, compared with $9.23 in the 2022 period. The average sales price of natural gas was $8.25 per thousand cubic feet in the first six months of 2023, compared with $9.04 in the 2022 period.

Net oil-equivalent production of 1.74 million barrels per day in second quarter 2023 was up 16,000 barrels per day from second quarter 2022. The increase was primarily due to lower impacts from turnarounds in Australia, partially offset by shutdowns in Canada due to wildfires and other related disruptions. Net oil-equivalent production of 1.78 million barrels per day in the first six months of 2023 was down 25,000 barrels per day, or 1 percent, from a year earlier. The decrease was primarily due to lower production following expiration of the Erawan concession in Thailand and shutdowns in Canada due to wildfires and other related disruptions, partially offset by lower impacts from turnarounds in Australia.

The net liquids component of oil-equivalent production of 827,000 barrels per day in second quarter 2023 increased 4 percent from the 2022 period. The net liquids component of oil-equivalent production of 838,000 barrels per day in the first six months of 2023 increased 1 percent from the 2022 period. Net natural gas production of 5.48 billion cubic feet per day in second quarter 2023 decreased 1 percent from the 2022 period. Net natural gas production of 5.62 billion cubic feet per day in the first six months of 2023 decreased 4 percent from the 2022 period.

Downstream


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
U.S. Downstream Earnings	$	1,081	$	2,440	$	2,058	$	2,926

U.S. downstream reported earnings of $1.1 billion in second quarter 2023, compared with $2.4 billion a year earlier. The decrease was mainly due to lower margins on refined product sales of $1.0 billion and higher operating expenses of $190 million.

U.S. downstream reported earnings of $2.1 billion in the first six months of 2023, compared with $2.9 billion a year earlier. The decrease was mainly due to higher operating expenses of $360 million, lower earnings from the 50 percent-owned CPChem of $230 million and lower margins on refined product sales of $190 million.

Refinery crude oil input in second quarter 2023 increased 9 percent to 962,000 barrels per day from the second quarter of 2022. The increase was primarily due to the absence of 2022 turnaround activity at the Richmond, California refinery. Refinery crude oil input for the first six months of 2023 increased 3 percent to 926,000 barrels per day from the corresponding 2022 period. The increase was primarily due to a smaller impact from planned turnaround activity at the Richmond, California refinery, partially offset by planned turnaround impacts at the El Segundo, California refinery in first quarter 2023.

Refined product sales in second quarter 2023 were up 7 percent to 1.30 million barrels per day from the second quarter of 2022. Refined product sales for the first six months of 2023 were up 5 percent to 1.27 million barrels per day from the corresponding 2022 period. The increase for both the quarterly and six-month periods was primarily due to higher renewable fuel sales following the Renewable Energy Group, Inc. acquisition and higher demand for gasoline and jet fuel.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
International Downstream Earnings*	$	426	$	1,083	$	1,249	$	928

* Includes foreign currency effects	$	4	$	145	$	22	$	168

International downstream reported earnings of $426 million in second quarter 2023, compared with $1.1 billion a year earlier. The decrease in earnings was mainly due to lower margins on refined product sales of $540 million. Foreign currency effects had an unfavorable impact on earnings of $141 million between periods.

International downstream reported earnings of $1.2 billion in the first six months of 2023, compared with $928 million a year earlier. The increase in earnings was mainly due to higher margins on refined product sales of $610 million, partially offset by higher operating expenses of $340 million and an unfavorable swing in foreign currency effects of $146 million between periods.

Refinery crude oil input of 623,000 barrels per day in second quarter 2023 decreased 2 percent from the year-ago period due to a larger impact from planned turnaround activity. Refinery crude oil input of 625,000 barrels per day for the first six months of 2023 was flat with the year-ago period.

Total refined product sales in second quarter 2023 increased 9 percent to 1.45 million barrels per day from the second quarter of 2022. Refined product sales for the first six months of 2023 were up 9 percent to 1.46 million barrels per day from the corresponding 2022 period. The increase for both periods was primarily due to higher demand for jet fuel as air travel increased in Asia.

All Other


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Earnings/(Charges)*	$	(433)	$	(459)	$	(820)	$	(1,465)

* Includes foreign currency effects	$	(4)	$	(80)	$	(6)	$	(177)

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 2023 were $433 million, compared to $459 million a year earlier. The decrease in net charges between periods was mainly due to higher interest income, partially offset by higher employee benefit costs. Foreign currency effects decreased net charges by $76 million between periods.

Net charges in the first six months of 2023 were $820 million, compared to $1.5 billion a year earlier. The decrease in net charges between periods was mainly due to higher interest income, lower employee benefit costs and a favorable swing of $171 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
	2023		2022		2023		2022
	(Millions of dollars)
Sales and other operating revenues	$	47,216	$	65,372	$	96,058	$	117,686

Sales and other operating revenues decreased for the second quarter and the six-month period mainly due to lower commodity prices, partially offset by higher refined product sales volumes.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Income from equity affiliates	$	1,240	$	2,467	$	2,828	$	4,552

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


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Other income (loss)	$	440	$	923	$	803	$	897

Other income for the second quarter and the six-month period decreased due to an unfavorable swing in foreign currency effects and lower gains on asset sales, partially offset by higher interest income and income from Venezuela non-equity investments.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Purchased crude oil and products	$	28,984	$	40,684	$	58,391	$	74,095

Purchased crude oil and products decreased for the second quarter and the six-month period primarily due to lower commodity prices.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Operating, selling, general and administrative expenses	$	7,185	$	7,181	$	14,087	$	13,786

Operating, selling, general and administrative expenses in the second quarter were flat compared to a year ago primarily as higher transportation and employee benefit expenses were offset by the absence of an early contract termination charge. Operating, selling, general and administrative expenses in the six-month period increased year-over-year primarily due to higher transportation expenses and higher services and fees, partially offset by lower employee benefit expenses and the absence of an early contract termination charge.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Exploration expenses	$	169	$	196	$	359	$	405

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


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Depreciation, depletion and amortization	$	3,521	$	3,700	$	7,047	$	7,354

Depreciation, depletion and amortization expenses for the second quarter and the six-month period decreased primarily due to lower rates and impacts from expiration of Erawan concession in Thailand.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Taxes other than on income	$	1,041	$	882	$	2,137	$	2,122

Taxes other than on income for the second quarter and the six-month period increased mainly due to higher excise taxes, property taxes and payroll taxes, partially offset by lower taxes on production, in line with lower prices.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Interest and debt expense	$	120	$	129	$	235	$	265

Interest and debt expenses for the second quarter and the six-month period decreased mainly due to higher capitalized interest.


	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
	(Millions of dollars)
Other components of net periodic benefit costs	$	39	$	(13)	$	77	$	51

Other components of net periodic benefit costs for the second quarter and for the six-month period increased primarily due to the impact of higher interest rates, partially offset by 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
	2023		2022		2023		2022
	(Millions of dollars)
Income tax expense/(benefit)	$	1,829	$	4,288	$	4,743	$	7,065

The decrease in income tax expense for second quarter 2023 of $2.5 billion is consistent with the decrease in total income before tax for the company of $8.2 billion.

U.S. income before tax decreased from $7.0 billion in second quarter 2022 to $2.9 billion in second quarter 2023. This $4.1 billion decrease in income was primarily driven by lower upstream realizations and downstream margins and had a direct impact on the company’s U.S. income tax, resulting in a decrease in tax expense of $933 million between year-over-year periods, from $1.6 billion in 2022 to $650 million in 2023.

International income before tax decreased from $9.0 billion in second quarter 2022 to $5.0 billion in second quarter 2023. This $4.0 billion decrease in income was primarily driven by lower upstream realizations and downstream margins. The decrease in income primarily drove the $1.5 billion decrease in international income tax expense between year-over-year periods, from $2.7 billion in 2022 to $1.2 billion in 2023.

The company's decrease in income tax expense for the first six months of 2023 of $2.3 billion was primarily due to the decrease in the total before-tax income in 2023 of $7.7 billion.

U.S. income before tax decreased between the six-month periods, from $10.7 billion in 2022 to $6.0 billion in 2023. This decrease in income was primarily driven by lower upstream realizations and higher downstream operating expenses. The decrease in income had a direct impact on the company’s U.S. income tax resulting in a decrease in tax expense of $1.1 billion between the six-month periods, from $2.5 billion in 2022 to $1.4 billion in 2023.

International income before tax decreased for the six-month period, from $14.3 billion in 2022 to $11.4 billion in 2023. This decrease in income was primarily due to lower upstream realizations partially offset by higher downstream margins. The decrease in income primarily drove the $1.2 billion decrease in international income tax expense between year-over-year periods, from $4.6 billion in 2022 to to $3.4 billion in 2023.

Additional information related to the company’s effective income tax rate is included in Note 9 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
	2023		2022		2023			2022
U.S. Upstream
Net crude oil and natural gas liquids production (MBD)	916		888		896			884
Net natural gas production (MMCFD)(3)	1,817		1,705		1,780			1,766
Net oil-equivalent production (MBOED)	1,219		1,172		1,193			1,178
Sales of natural gas (MMCFD)	4,529		4,337		4,314			4,388
Sales of natural gas liquids (MBD)	300		258		299			263
Revenue from net production
Liquids ($/Bbl)	$	56.29	$	88.71	$	57.64		$	82.72
Natural gas ($/MCF)	$	1.23	$	6.22	$	1.88		$	5.13
International Upstream
Net crude oil and natural gas liquids production (MBD)(4)	827		799		838			828
Net natural gas production (MMCFD)(3)	5,478		5,548		5,624			5,832
Net oil-equivalent production (MBOED)(4)	1,740		1,724		1,775			1,800
Sales of natural gas (MMCFD)	5,676		4,535		5,730			4,702
Sales of natural gas liquids (MBD)	83		83		87			90
Revenue from liftings
Liquids ($/Bbl)	$	68.06	$	102.30	$	68.48		$	97.74
Natural gas ($/MCF)	$	7.50	$	9.23	$	8.25		$	9.04
U.S. and International Upstream
Total net oil-equivalent production (MBOED)(4)	2,959		2,896		2,968			2,978
U.S. Downstream
Gasoline sales (MBD)(5)	673		634		641			639
Other refined product sales (MBD)	622		576		633			575
Total refined product sales (MBD)	1,295		1,210		1,274			1,214
Sales of natural gas (MMCFD)	34		27		32			24
Sales of natural gas liquids (MBD)	20		37		20			35
Refinery crude oil input (MBD)	962		881		926			898
International Downstream
Gasoline sales (MBD)(5)	323		281		310			281
Other refined product sales (MBD)	764		673		772			683
Share of affiliate sales (MBD)	366		383		374			368
Total refined product sales (MBD)	1,453		1,337		1,456			1,332
Sales of natural gas (MMCFD)	—		2		1		1,332	3
Sales of natural gas liquids (MBD)	177		141		157			130
Refinery crude oil input (MBD)	623		634		625			626
(1) Includes company share of equity affiliates.
(2) MBD — thousands of barrels per day; MMCFD — 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; MBOED — thousands of barrels of oil-equivalent per day.
(3) Includes natural gas consumed in operations (MMCFD):
United States	52		57		50			57
International	531		496		531			523
(4) Includes net production of synthetic oil:
Canada	46		39		48			39

(5) Includes branded and unbranded gasoline.

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities totaled $9.6 billion at June 30, 2023 and $17.9 billion at year-end 2022. The company holds its cash with a diverse group of major financial institutions and has processes and safeguards in place to manage its cash balances and mitigate the risk of loss. Cash provided by operating activities in the first six months of 2023 was $13.5 billion, compared with $21.8 billion in the year-ago period. Capital expenditures totaled $6.8 billion in the first six months of 2023, up $1.7 billion from the year-ago period. Proceeds and deposits related to asset sales and returns of investment totaled $171 million and $153 million, respectively, in the first six months of 2023, compared to $1.3 billion and $1.1 billion, respectively, in the year-ago period. Cash provided by financing activities includes proceeds from shares issued for stock option exercises of $181 million in the first six months of 2023, compared with $5.5 billion in the year-ago period.

Dividends The company paid dividends of $5.7 billion to common stockholders during the first six months of 2023. In July 2023, the company declared a quarterly dividend of $1.51 per common share, payable in September 2023.

Debt and Finance Lease Liabilities Chevron’s total debt and finance lease liabilities were $21.5 billion at June 30, 2023, down from $23.3 billion at December 31, 2022 as the company repaid notes that matured during the period.

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 $5.2 billion at June 30, 2023, and $6.0 billion at December 31, 2022. Of these amounts, $4.0 billion was reclassified to long-term at June 30, 2023, and $4.1 billion was reclassified to long-term at December 31, 2022. At June 30, 2023, 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.

The company has access to a commercial paper program as a financing source for working capital or other short-term needs. The company had no commercial paper outstanding as of June 30, 2023.

At June 30, 2023, the company had $8.5 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. This supports 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 Secured Overnight Financing Rate (SOFR), 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, 2023. In addition, the company has an automatic shelf registration statement 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, 2023		Year Ended December 31, 2022
	(Millions of dollars) (unaudited)
Sales and other operating revenues	$	49,456	$	126,911
Sales and other operating revenues - related party	21,547		50,082
Total costs and other deductions	49,036		121,757
Total costs and other deductions - related party	17,768		43,042
Net income (loss)	$	7,531	$	15,043


	At June 30, 2023		At December 31, 2022
	(Millions of dollars) (unaudited)
Current assets	$	21,056	$	28,781
Current assets - related party	13,851		12,326
Other assets	52,738		50,505
Current liabilities	21,225		22,663
Current liabilities - related party	123,815		118,277
Other liabilities	26,273		27,353
Total net equity (deficit)	$	(83,668)	$	(76,681)

Common Stock Repurchase Program On January 25, 2023, the Board of Directors authorized the repurchase of the company’s shares of common stock in an aggregate amount of $75 billion (the “2023 Program”). The 2023 Program took effect on April 1, 2023, and does not have a fixed expiration date. In second quarter 2023 and in the aggregate, the company repurchased 27.3 million shares for $4.4 billion under the 2023 Program. The company expects to repurchase at least $3.0 billion of its common stock during third quarter 2023 under the 2023 Program.

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 and any forward guidance as to expected repurchases do not obligate the company to acquire any particular amount of common stock, and the program may be discontinued or resumed at any time.

Noncontrolling Interests The company had noncontrolling interests of $973 million at June 30, 2023 and $960 million at December 31, 2022. Included within noncontrolling interests is $147 million at June 30, 2023 and $142 million at December 31, 2022 of redeemable noncontrolling interest.

Financial Ratios and Metrics


	At June 30, 2023		At December 31, 2022
Current Ratio (1)	1.4		1.5
Debt Ratio	12.0	%	12.8	%
Net Debt Ratio (2)	7.0	%	3.3	%

(1) At June 30, 2023, the book value of inventory was lower than replacement cost.

(2) Net Debt Ratio for June 30, 2023 is calculated as short-term debt of $1.3 billion plus long-term debt of $20.2 billion (together, “total debt”) less cash and cash equivalents of $9.3 billion and marketable securities of $318 million as a percentage of total debt less cash and cash equivalents and marketable securities, plus Chevron Corporation Stockholders’ Equity of $158.3 billion. For the December 31, 2022 calculation, please refer to page 49 of Chevron’s 2022 Annual Report on Form 10-K.


	Six Months Ended June 30
		2023		2022
	(Millions of dollars)
Net cash provided by operating activities		$	13,502	$	21,837
Less: Capital expenditures		(6,795)		(5,144)
Free Cash Flow		$	6,707	$	16,693

Pension Obligations Information related to pension plan contributions is included in Note 7 Employee Benefits to the Consolidated Financial Statements.

Capital Expenditures The company’s capital expenditures (capex) primarily includes additions to fixed assets or investments for the company’s consolidated subsidiaries and is disclosed in the Consolidated Statement of Cash Flows. Second quarter 2023 capex was $573 million higher than second quarter 2022 and year-to-date 2023 capex was $1.7 billion higher than the year-ago period, primarily due to higher upstream spend in the Permian Basin.

Affiliate Capital Expenditures The company’s affiliate capital expenditures (affiliate capex) primarily includes additions to fixed assets or investments in the equity affiliate’s financial statements and does not require cash outlays by the company. Second quarter 2023 affiliate capex was $167 million higher than second quarter 2022 and year-to-date 2023 affiliate capex was $311 million higher than the year-ago period, primarily due to higher spend at CPChem.


Capex and Affiliate Capex by Business Segment
	Three Months Ended June 30				Six Months Ended June 30
	2023		2022		2023		2022
Capex	(Millions of dollars)
United States
Upstream	$	2,296	$	1,549	$	4,214	$	2,836
Downstream	379		715		710		838
All Other	90		86		121		128
Total United States	2,765		2,350		5,045		3,802
International
Upstream	940		621		1,662		1,101
Downstream	48		208		78		235
All Other	4		5		10		6
Total International	992		834		1,750		1,342
Capex	$	3,757	$	3,184	$	6,795	$	5,144
Affiliate Capex
Upstream	$	615	$	602	$	1,254	$	1,179
Downstream	361		207		591		355
Affiliate Capex	$	976	$	809	$	1,845	$	1,534

Contingencies and Significant Litigation

Ecuador Information related to Ecuador matters is included in Note 10 Litigation under the heading “Ecuador.”

Climate Change Information related to climate change-related matters is included in Note 10 Litigation under the heading “Climate Change.”

Louisiana Information related to Louisiana coastal matters is included in Note 10 Litigation under the heading “Louisiana.”

Income Taxes Information related to income tax contingencies is included in Note 9 Income Taxes and in Note 11 Other Contingencies and Commitments under the heading “Income Taxes.”

Guarantees Information related to the company’s guarantees is included in Note 11 Other Contingencies and Commitments under the heading “Guarantees.”

Indemnifications Information related to indemnifications is included in Note 11 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 11 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 11 Other Contingencies and Commitments under the heading “Environmental.”

Other Contingencies Information related to the company’s other contingencies is included in Note 11 Other Contingencies and Commitments under the heading “Other Contingencies.”

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