Chevron exceeded Wall Street estimates for its first-quarter earnings on Friday, as elevated oil prices linked to the US-Israeli war on Iran helped boost results from its upstream business.
The company reported adjusted earnings of $1.41 per share, well above the consensus estimate of 95 cents, according to data compiled by LSEG. Despite the strong beat, overall profit marked its lowest level in five years, partly due to unfavorable timing effects tied to financial derivatives.
Chevron's upstream segment, its largest business unit, generated $3.9 billion in earnings, up 4% year-on-year as higher oil prices led to increased revenue.
"Despite heightened geopolitical volatility and related supply disruptions, Chevron delivered solid first-quarter performance, underscoring the resilience of our portfolio and the value of disciplined execution," CEO Mike Wirth said in a statement.
The conflict with Iran, which began on February 28, significantly disrupted global energy markets. Shipping through the Strait of Hormuz was nearly halted, tightening supply and pushing oil prices up as much as 50% during the reported quarter.
Net income for the January-March period totaled $2.2 billion, down from $3.5 billion a year earlier. However, Chevron's exposure to the Middle East turmoil remains limited, accounting for less than 5% of its total production.
DOWNSTREAM RESULTS IN THE RED
In contrast, downstream operations swung to a loss of $817 million, from a profit of $325 million last year. This decline was largely due to accounting mismatches from derivative-related timing effects, which are expected to start reversing in the next quarter.
Larger rival Exxon also disclosed a similar hit from timing effects.
Chevron anticipates that paper positions worth about $1 billion will close and result in profit in the second quarter, Chief Financial Officer Eimear Bonner said in an interview.
Excluding timing effects that are typical in a volatile environment, she said Chevron's underlying business was strong.
"We can see cash flow growing, we can see earnings growing, and all our plans are on track."
The company said it could see additional timing effects if oil prices continue to rise and further "unwinds" when prices fall.
LIMITED MIDDLE EAST EXPOSURE
Chevron has lower production exposure to the Middle East compared with its peers. Production in the US remained robust, exceeding 2 million barrels per day for the third consecutive quarter, the company said.
First-quarter volumes declined slightly to 3.86 million barrels of oil equivalent per day compared with the previous three months due to downtime at the Tengiz field in Kazakhstan after a fire.
Free cash flow also swung to a negative $1.5 billion due to lower operating cash flow. On an adjusted basis excluding impacts to working capital, the metric was still down from the year-ago quarter.
Bonner reaffirmed the company's target of achieving at least 10% annual growth in adjusted free cash flow through 2030. During the quarter, Chevron paid $3.5 billion in dividends and repurchased $2.5 billion worth of shares. The buyback figure was lower than the previous quarter, though Bonner said the company continues to target full-year buybacks between $10 billion and $20 billion.
Chevron's results were strong, though some investors may be disappointed by the lack of buyback increases, said Biraj Borkhataria, an analyst with RBC Capital Markets, in a research note. He added that stronger cash generation this year could help lift repurchases in the second quarter.
The company said that capital expenditure in the first three months of 2026 was higher than last year, partly due to investments tied to its Hess acquisition, although this was offset by reduced spending in the Permian Basin.
Chevron shares were up less than 1% in pre-market trading.
