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Understanding Chevron’s Capex Trends

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Chevron’s capex geographical spread

In the previous parts of this series, we looked at Chevron’s (CVX) improving debt and cash flow trends. We also discussed analysts’ rating for CVX. In this part, we’ll look at CVX’s capex (capital expenditure).

Chevron’s (CVX) capex mostly focuses on the upstream segment. In 4Q17, Chevron incurred 82% capex in the upstream segment, 16% in the downstream segment, and 2% in other activities.

Of the 82% in the upstream segment, 50% was in the international arena and 32% in the United States. With such a large investment in upstream, Chevron expects the upstream segment to be its earnings growth driver. But of the 16% capex in the downstream segment, 11% was in the United States and 4% was international.

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Rise in Chevron’s capex in 4Q17

In 4Q17, Chevron’s capex rose 3% YoY (year-over-year) to $5.4 billion. The marginal rise was due to a rise in the domestic upstream and downstream segment, partly offset by the decline in the international upstream segment.

The international upstream segment’s capex fell 16% YoY to $2.7 billion in 4Q17, which was in line with Chevron’s strategy to cut capex, as we discussed earlier in this series. Also, possibly because of the huge capital-intensive projects becoming operational, a large international capex outlay seems like a thing of the past.

However, in 4Q17, the capex in the US upstream and downstream segments rose 40% YoY each to $1.7 billion and $0.61 billion, respectively. Also, with Chevron’s focus on the US Gulf of Mexico and Permian Basin, CVX domestic upstream investments might rise in the coming years. We’ll discuss CVX’s Gulf of Mexico focus later in this series.

Peers’ capex

In 4Q17, ExxonMobil (XOM) incurred capex (capital expenditure) of $9.0 billion, compared to $4.8 billion in 4Q16. Of the 4Q17 capex, $7.6 billion was incurred for the upstream segment. BP’s (BP) organic capex (capital expenditure) for 4Q17 stood at $4.6 billion, compared to $4.5 billion in 4Q16. BP’s organic capex for 2017 stood at $16.5 billion. In 4Q17, Royal Dutch Shell (RDS.A) incurred a total capital investment of $6.8 billion, compared to $6.9 billion in 4Q16.

In the next part of this series, we’ll review Chevron’s segmental earnings trend in 4Q17.

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