Today, let's keep our focus on the US energy sector. Last time, I discussed the largest oil company in the US - ExxonMobil. This time, let's take a look at the runner-up, Chevron, which is second only to ExxonMobil.
Last time I mentioned Exxon, it was at the peak of oil prices, and US stocks hit new highs. Currently, with the pullback in oil prices, it has dropped 15%, but it's still holding strong. However, it's not a major issue. If there's a conflict and the Strait of Hormuz gets closed, you might want to consider this oil leader, as its gains will likely outpace the oil itself.
Let's continue looking at the US stock market oil giant #2 - Chevron.
1. Overview
Chevron Corporation (NYSE: CVX) is a leading global integrated energy giant headquartered in San Ramon, California, with a total market value of approximately $368 billion (current stock price around $184.78). The company's business spans upstream (oil and gas exploration and production), downstream (refining, marketing, and transportation), and chemicals, as well as producing fuel vehicles.
Chevron was originally known as the Standard Oil of California (Socal), a result of the breakup of Standard Oil due to antitrust cases in 1911. Chevron is one of the six largest oil companies in the world and the second-largest integrated energy company in the US (after ExxonMobil).
2. Business Moat
2.1 Resource Advantages
Chevron holds high-quality oil and gas assets globally:
- Permian Basin (Core Shale Region in the US)
- Gulf of Mexico (Deepwater Oil Fields)
- Kazakhstan Tengiz Oil Field (Super Oil Field)
Characteristics of these assets:
- Low extraction costs
- Long lifecycle
- Strong ability to withstand oil price fluctuations
2.2 Cost Control Ability (Industry Leader)
In the oil industry: survival isn't about how much you earn, but whether you can withstand the cycles.
Characteristics of Chevron:
- Shale oil cost: approximately $30-$40 per barrel
- Global average costs lower than peers
- Strong CAPEX discipline (no reckless expansion), meaning they have excellent control over capital expenditures, spending when necessary and holding back when not needed.
2.3 Cash Flow Machine + Shareholder Returns
Chevron's biggest label is actually: 'Cash Cow Company'. Its stock has long been known for high dividends (dividend yield consistently between 3% and 5%), aggressive buybacks (having repurchased $12 billion in the last 12 months), and low debt.
This type of company is highly favored by Buffett, who began accumulating shares in 2020 and has purchased 160 million shares, making it one of his top five holdings.
3. Financial Data
Current market cap is $368 billion, with a P/E ratio of 27.8x, slightly higher than XOM's (ExxonMobil) 24x. Their earnings on the US stock market are around 6.67, similar to XOM, but XOM's stock price is cheaper than CVX.
The company's annual revenue is very stable, maintaining around $190 billion for the past three years, with net income starting to decline from 2022, dropping from $35 billion in 2022 to an expected $12 billion by 2025.
Previously, we looked at the revenues and incomes of the Seven Sisters, and MAG7's revenue is almost all growing. Companies like Nvidia have even managed to double their earnings, and tech stocks have very high profit margins, showing how 'scary' tech stocks can be! Therefore, it is still recommended to allocate limited resources to tech stocks.
Of course, this doesn't mean that traditional energy companies are ineffective. If you look at stock prices, CVX's monthly performance is almost in line with the market. Since the low point in 2020 at $50, it has tripled, which is somewhat opposite to the tech stock cycle.
In terms of revenue structure, most of the income still comes from upstream activities, that is, earning from energy sales, accounting for 75% of total revenue.
In conclusion, I feel that oil prices are still high, and both Oil Dragon 1 and Dragon 2 are at elevated stock prices right now. In the short term, it's not a good time to jump in; we should wait for oil prices to drop before considering any positions.
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