Chevron’s cash flow
In the first half of 2018, Chevron’s (CVX) cash flow from operations was $11.9 billion, rising from $8.8 billion in the first half of 2017. Its cash outflow from investing stood at $5.4 billion in the first half of 2018 compared to $4.1 billion in the first half of 2017. Its cash outflows from financing was $3.7 billion due to debt and dividend outflows in the first half of the year.
Chevron’s cash flow from shortfall to surplus
In the first half of the year, Chevron generated $11.9 billion in cash from operations. But it had a cash outflow of $6.2 billion in the form of capital expenditure and $4.3 billion in the form of dividends, totaling $10.5 billion for essential cash outflows. That led to a cash flow surplus of $1.4 billion (the difference between $11.9 billion of cash inflows and $10.5 billion of cash outflows).
Chevron also raised $0.8 billion from asset sales and $1 billion from the sales of Treasury shares. That resulted in $3.2 billion of excess cash, of which $0.4 billion was used to repay debt. The rest was added to Chevron’s cash reserves. Its cash balance, including restricted cash, rose from $5.9 billion at the beginning of the year to $8.7 billion at the end of the first half of the year.
If we estimate CVX’s surplus as a percentage of its earnings capacity (cash flow from operations), it was 12%. By comparison, in the first half of 2017, it had a cash flow shortfall of 21%. Thus, Chevron’s cash flow switched from a shortfall to a surplus, which is a favorable sign. That implies a robust improvement in Chevron’s liquidity position.
Since the company is generating surplus cash, it’s targeting to buy back $3 billion of shares annually.