Chevron beats estimates, expands Venezuelan crude processing
Oil giant adds capacity to process 100,000 b/d of heavy crude as sanctions ease
Chevron shares advanced on Friday after the oil giant reported better-than-expected fourth-quarter earnings and revealed plans to significantly expand its processing of Venezuelan crude at US refineries.
The California-based energy company reported adjusted earnings per share of $1.52, beating analysts' consensus estimate of $1.44 by $0.08. Revenue of $45.79 billion fell short of Wall Street expectations of $48.18 billion and represented a 10.2% decline from the same period last year, reflecting softer commodity prices.
Despite the revenue shortfall, Chevron demonstrated strong operational discipline. The company generated approximately $20 billion in adjusted free cash flow during 2025, an increase of more than 35% year-over-year excluding asset sales. Chevron returned $3 billion to shareholders through share repurchases in the fourth quarter and raised its quarterly dividend by 4%, continuing its decades-long tradition of annual dividend increases.
Chief Executive Mike Wirth outlined the company's strategic positioning during the earnings announcement, highlighting a significant opportunity to expand heavy crude processing capacity. Chevron currently processes about 50,000 barrels per day of Venezuelan crude at its 356,500 b/d Pascagoula refinery in Mississippi, but Wirth stated the company can add another 100,000 b/d of Venezuelan crude into its refining system. The additional capacity will utilize both Pascagoula and the 285,000 b/d El Segundo refinery in California, which possesses coking capacity essential for processing ultra-heavy Venezuelan crude.
The expansion comes as the United States moves to increase Venezuelan oil imports following recent policy shifts. The US is now positioned to import the most Venezuelan oil in a year with the Trump administration's backing, creating a new supply dynamic for Gulf Coast and West Coast refiners.
Chevron's unique advantage stems from its existing license to operate in Venezuela, where it maintains joint ventures with state-owned PDVSA. While other US refiners are just beginning to access Venezuelan crude again after years of sanctions, Chevron has maintained operational continuity and deep knowledge of the country's heavy oil resources. The heavy crude margin advantage could prove particularly valuable as global refining margins for light sweet crude face pressure from increased capacity.
The company's operational performance extended beyond its Venezuelan operations. Chevron achieved $1.5 billion in structural cost savings during 2025 and has set a new target of $3-4 billion in savings by the end of 2026. Production growth remains a priority, with the company anticipating a 7-10% increase in output during 2026, excluding asset sales. This growth profile stands in contrast to many supermajors that have shifted toward buybacks over production expansion.
Analysts have maintained a generally positive outlook on Chevron, with 15 analysts rating the stock a buy and 10 recommending hold. The average analyst target price of $176.12 suggests limited upside from current levels, though recent momentum in energy markets has surprised to the upside. Chevron and rival Exxon Mobil are both heading for their best month since 2022 as crude prices have strengthened, driven by supply constraints and improving demand outlook.
The Venezuelan crude expansion strategy represents a calculated bet on the longevity of sanctions relief. While the current geopolitical environment favors increased Venezuelan exports, the policy landscape remains subject to shifts. Chevron's existing infrastructure relationships and technical expertise in Venezuelan heavy oil processing provide competitive moats that would be difficult for competitors to replicate quickly.
For investors, the appeal of Chevron lies in its combination of steady shareholder returns, disciplined capital allocation, and optionality on Venezuelan heavy crude margins. The 4% dividend yield, modest production growth outlook, and potential for refining margin expansion from cheap heavy crude feedstock create a diversified value proposition that differentiates Chevron from peers focused more purely on upstream production or pure-play refining.
As the global energy transition continues, Chevron's integrated model provides insulation from pure commodity price volatility while maintaining exposure to oil demand through its refining and marketing network. The Venezuelan crude capacity expansion, if sustained, could become a meaningful contributor to earnings power in what remains an uncertain policy environment.