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 unfavourable timing effects tied to financial derivatives.
Chevron's upstream segment, its largest business unit, generated $3.9 billion in earnings, up four per cent year-on-year as higher oil prices led to increased revenue. Earnings from international upstream surpassed expectations, analysts from Jefferies said.
The conflict with Iran, which began on February 28, significantly disrupted global energy markets with shipping through the Strait of Hormuz nearly halted, tightening supply and pushing oil prices up as much as 50 per cent during the reported quarter.
Chevron CEO Mike Wirth said it was too soon to say how current events will ultimately reshape the sector.
"The new equilibrium will look different than what we've known before, but I'm not sure I could argue with a lot of confidence that I could describe exactly what that looks like. One thing you can expect from us is consistency," he said during a conference call with analysts.
Net income for the January-March period totalled $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 five per cent of its total production.
Higher oil prices, meanwhile, are allowing Chevron to recoup debt owed by Venezuela at a faster pace, and the amount could be fully paid off in 2027, Wirth said.
Shares of Chevron were down about 1.4 per cent in morning trading, in line with the broader SP 500 energy sector.
Despite the higher prices, Chevron's 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.
Chevron has lower production exposure to the Middle East compared with its peers. Production in the US remained robust, exceeding two 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 per cent 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.
(Reporting by Sheila Dang in Houston; Editing by Nathan Crooks, Sherry Jacob-Phillips, Chizu Nomiyama and Daniel Wallis)