CHEVRON CORP (CVX)

Results of Operations

The following section presents the results of operations and variances on an after-tax basis for the company’s business segments – Upstream and Downstream – as well as for “All Other.” Earnings are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. Refer to Note 14 Operating Segments and Geographic Data for a discussion of the company’s “reportable segments.” This section should also be read in conjunction with the discussion in Business Environment and Outlook. Refer to the Selected Operating Data for a three-year comparison of production volumes, refined product sales volumes and refinery inputs. A discussion of variances between 2023 and 2022 can be found in the “Results of Operations” section on pages 41 through 43 of the company’s 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024.

Worldwide Upstream earningsBillions of Dollars

Worldwide Downstream earningsBillions of dollars

U.S. refined product salesThousands of barrels per day

International refined product sales*Thousands of barrels per day

U.S. Upstream

U.S. upstream earnings increased by $3.5 billion primarily due to higher sales volumes of $2.2 billion, including from legacy PDC assets, and the absence of charges from decommissioning obligations for previously divested assets in the Gulf of America of $1.9 billion, partly offset by lower realizations of $790 million.

Net oil-equivalent production was up 250,000 barrels per day, or 19 percent, primarily due to full-year of legacy PDC production and growth in the Permian Basin.

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International Upstream

International upstream earnings decreased by $2.3 billion primarily due to lower realizations of $770 million, higher operating expenses of $580 million, lower sales volumes of $570 million and absence of favorable one-time tax benefit in Nigeria of $560 million. Foreign currency effects had a favorable impact on earnings of $19 million between periods.

Net oil-equivalent production was down 32,000 barrels per day, or 2 percent. The decrease was primarily due to downtime at TCO and Nigeria, and withdrawal from Myanmar, partly offset by entitlement effects.

U.S. Downstream

U.S. downstream earnings decreased by $3.4 billion primarily due to lower margins on refined product sales of $2.6 billion and higher operating expenses of $810 million.

Refinery crude unit inputs were down 45,000 barrels per day, or 5 percent, primarily due to the upgrade of the Pasadena, Texas refinery that was completed during the fourth quarter 2024 and downtime at the Pascagoula, Mississippi refinery.

Refined product sales were down 1,000 barrels per day.

International Downstream

International downstream earnings decreased by $1.0 billion primarily due to lower margins on refined product sales of $880 million and impairments of $190 million. Foreign currency effects had a favorable impact on earnings of $138 million between periods.

Refinery crude unit inputs were up 10,000 barrels per day, or 2 percent.

Refined product sales were up 50,000 barrels per day, or 3 percent, primarily due to increased trading volumes.

All Other

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies.

Net charges increased by $462 million primarily due to higher employee benefit costs, severance charges, lower interest income and higher interest expense, partially offset by a favorable swing of $587 million in foreign currency effects.

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Results of Operations

The following section presents the results of operations and variances on an after-tax basis for the company’s business segments – Upstream and Downstream – as well as for “All Other.” Earnings are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. Refer to Note 14 Operating Segments and Geographic Data for a discussion of the company’s “reportable segments.” This section should also be read in conjunction with the discussion in Business Environment and Outlook. Refer to the Selected Operating Data for a three-year comparison of production volumes, refined product sales volumes and refinery inputs. A discussion of variances between 2022 and 2021 can be found in the “Results of Operations” section on pages 39 through 40 of the company’s 2022 Annual Report on Form 10-K filed with the SEC on February 23, 2023.

U.S. Upstream

U.S. upstream earnings decreased by $8.5 billion primarily due to lower realizations of $6.2 billion, $1.9 billion in charges related to abandonment and decommissioning obligations for previously sold oil and gas producing assets in the U.S. Gulf of Mexico, and higher impairment charges of $1.8 billion, mainly from assets in California. Partially offsetting these items are higher sales volumes of $1.9 billion. Higher 2023 operating expenses of $460 million were more than offset by the absence of a 2022 early contract termination at Sabine Pass of $600 million.

Net oil-equivalent production was up 168,000 barrels per day, or 14 percent, primarily due to the acquisition of PDC and growth in the Permian Basin.

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International Upstream

International upstream earnings decreased by $4.4 billion primarily due to lower realizations of $7.2 billion and lower sales volumes of $280 million, partially offset by lower depreciation expense of $1.4 billion mainly due to absence of write-off and impairment charges in 2022, lower operating expenses of $820 million and a favorable one-time tax benefit in Nigeria of $560 million. Foreign currency effects had an unfavorable impact on earnings of $440 million between periods.

Net oil-equivalent production was down 47,000 barrels per day, or 3 percent. The decrease was primarily due to normal field declines, shutdowns and lower production following expiration of the Erawan concession in Thailand.

U.S. Downstream

U.S. downstream earnings decreased by $1.5 billion primarily due to lower margins on refined product sales of $660 million, higher operating expenses of $490 million and lower earnings from the 50 percent-owned CPChem of $220 million.

Refinery crude oil input was up 68,000 barrels per day, or 8 percent, primarily due to a smaller impact from planned turnaround activity at the Richmond, California refinery and higher crude oil processed in place of other feedstocks at the Pascagoula, Mississippi refinery. These increases were partially offset by planned turnaround impacts at the El Segundo, California refinery in first quarter 2023.

Refined product sales were up 59,000 barrels per day, or 5 percent, primarily due to higher jet fuel demand and higher renewable fuel sales following the REG acquisition.

International Downstream

International downstream earnings decreased by $528 million primarily due to higher operating expenses of $360 million and an unfavorable swing in foreign currency effects of $247 million between periods.

Refinery crude oil input was down 13,000 barrels per day, or 2 percent, compared to the year-ago period.

Refined product sales were up 59,000 barrels per day, or 4 percent, primarily due to higher demand for jet fuel and gasoline.

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All Other

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies.

Net charges decreased by $768 million primarily due to lower employee benefit costs and higher interest income, partially offset by an unfavorable swing of $206 million in foreign currency effects.

Results of Operations

The following section presents the results of operations and variances on an after-tax basis for the company’s business segments – Upstream and Downstream – as well as for “All Other.” Earnings are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. Refer to Note 14 Operating Segments and Geographic Data for a discussion of the company’s “reportable segments.” This section should also be read in conjunction with the discussion in Business Environment and Outlook. Refer to the Selected Operating Data for a three-year comparison of production volumes, refined product sales volumes and refinery inputs. A discussion of variances between 2021 and 2020 can be found in the “Results of Operations” section on pages 39 through 40 of the company’s 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

U.S. Upstream

U.S. upstream reported earnings of $12.6 billion in 2022, compared with $7.3 billion in 2021. The increase was due to higher realizations of $6.6 billion and higher sales volumes of $380 million, partially offset by higher operating expenses of $1.1 billion largely due to an early contract termination at Sabine Pass and lower asset sale gains of $670 million.

The company’s average realization for U.S. crude oil and natural gas liquids in 2022 was $76.71 per barrel compared with $56.06 in 2021. The average natural gas realization was $5.55 per thousand cubic feet in 2022, compared with $3.11 in 2021.

Net oil-equivalent production in 2022 averaged 1.18 million barrels per day, up 4 percent from 2021. The increase was primarily due to net production increases in the Permian Basin.

The net liquids component of oil-equivalent production for 2022 averaged 888,000 barrels per day, up 3 percent from 2021. Net natural gas production averaged 1.76 billion cubic feet per day in 2022, an increase of 4 percent from 2021.

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International Upstream

International upstream reported earnings of $17.7 billion in 2022, compared with $8.5 billion in 2021. The increase was primarily due to higher realizations of $10.0 billion, lower operating expenses, lower depreciation, depletion and amortization related to end of concessions in Indonesia and Thailand of $1.3 billion and asset sale gains of $220 million. This was partially offset by lower sales volumes of $1.3 billion (also largely associated with the end of concessions in Indonesia and Thailand) and write-off and impairment charges of $1.1 billion. Foreign currency effects had a favorable impact on earnings of $514 million between periods.

The company’s average realization for international crude oil and natural gas liquids in 2022 was $90.71 per barrel compared with $64.53 in 2021. The average natural gas realization was $9.75 per thousand cubic feet in 2022 compared with $5.93 in 2021.

International net oil-equivalent production was 1.82 million barrels per day in 2022, down 7 percent from 2021. The decrease was primarily due to lower production following expiration of the Erawan concession in Thailand and Rokan concession in Indonesia.

The net liquids component of international oil-equivalent production was 831,000 barrels per day in 2022, a decrease of 13 percent from 2021. International net natural gas production of 5.92 billion cubic feet per day in 2022, a decrease of 2 percent from 2021.

U.S. Downstream

U.S. downstream reported earnings of $5.4 billion in 2022, compared with $2.4 billion in 2021. The increase was primarily due to higher margins on refined product sales of $4.4 billion, partially offset by lower earnings from the 50 percent-owned CPChem of $790 million and higher operating expenses of $790 million, largely due to planned turnarounds.

Total refined product sales of 1.23 million barrels per day in 2022 increased 8 percent from 2021, mainly due to higher renewable fuel sales following the REG acquisition and higher jet fuel demand.

International Downstream

International downstream earned $2.8 billion in 2022, compared with $525 million in 2021. The increase in earnings was mainly due to higher margins on refined product sales of $2.7 billion and a favorable swing in foreign currency effects of $50 million between periods, partially offset by higher operating expenses of $650 million, largely due to transportation costs.

Total refined product sales of 1.39 million barrels per day in 2022 were up 5 percent from 2021, mainly due to higher jet fuel demand as travel restrictions associated with the COVID-19 pandemic continue to ease.

All Other

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies.

Net charges in 2022 decreased $133 million from 2021. The change between periods was mainly due to lower pension settlement expense, loss on early debt retirement and lower interest expense, partially offset by the absence of 2021 favorable tax items and higher interest income. Foreign currency effects increased net charges by $201 million between periods.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Key Financial Results

Refer to the “Results of Operations” section beginning on page 38 for a discussion of financial results by major operating area for the three years ended December 31, 2021.

Business Environment and Outlook

Chevron Corporation is a global energy company with substantial business activities in the following countries: Angola, Argentina, Australia, Bangladesh, Brazil, Canada, China, Egypt, Equatorial Guinea, Israel, Kazakhstan, Kurdistan Region of Iraq, Mexico, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, the Philippines, Republic of Congo, Singapore, South Korea, Thailand, the United Kingdom, the United States, and Venezuela.

The company’s objective is to deliver higher returns, lower carbon and superior shareholder value in any business environment. Earnings of the company depend mostly on the profitability of its upstream business segment. The most significant factor affecting the results of operations for the upstream segment is the price of crude oil, which is determined in global markets outside of the company’s control. In the company’s downstream business, crude oil is the largest cost component of refined products. Periods of sustained lower commodity prices could result in the impairment or write-off of specific assets in future periods and cause the company to adjust operating expenses, including employee reductions, and capital and exploratory expenditures, along with other measures intended to improve financial performance.

Governments, companies, communities, and other stakeholders are increasingly supporting efforts to address climate change, recognizing that individuals and society benefit from access to affordable, reliable, and ever-cleaner energy. International initiatives and national, regional and state legislation and regulations that aim to directly or indirectly reduce GHG emissions are in various stages of adoption and implementation. These policies, some of which support the global net zero emissions ambitions of the Paris Agreement, can change the amount of energy consumed, the rate of energy-demand growth, the energy mix, and the relative economics of one fuel versus another. Implementation of these policies can be dependent on, and can affect the pace of, technological advancements, the granting of necessary permits by governing authorities, the availability of cost-effective, verifiable carbon credits, the availability of suppliers that can meet sustainability and other standards, evolving regulatory requirements affecting ESG standards or other disclosures, and evolving standards for tracking and reporting on emissions and emission reductions and removals. Beyond the legislative and regulatory landscape, ever changing customer and consumer behavior can also influence energy demand by affecting preferences and use of the company’s products or competitors’ products, now and in the future.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Chevron supports the Paris Agreement’s global approach to governments addressing climate change and is committed to taking actions to help lower the carbon intensity of its operations while continuing to meet the need for energy that supports society. Chevron integrates climate change-related issues and the regulatory and other responses to these issues into its strategy and planning, capital investment reviews, and risk management tools and processes, where it believes they are applicable. They are also factored into the company’s long-range supply, demand, and energy price forecasts. These forecasts reflect estimates of long-range effects from climate change-related policy actions, such as renewable fuel penetration and energy efficiency standards, and demand response to oil and natural gas prices. The actual level of expenditure required to comply with new or potential climate change-related laws and regulations and amount of additional investments in new or existing technology or facilities, such as carbon capture and storage, is difficult to predict with certainty and is expected to vary depending on the actual laws and regulations enacted or customer and consumer preference in a jurisdiction, the company’s activities in it, and market conditions. As discussed in more detail below, the company has announced planned capital spend of $10 billion through 2028 in lower carbon investments.

Although the future is uncertain, many published outlooks conclude that fossil fuels will remain a significant part of an energy system that increasingly incorporates lower carbon sources of supply. The company will continue to develop oil and gas resources to meet customers’ demand for energy. At the same time, Chevron believes that the future of energy is lower carbon. The company will continue to maintain flexibility in its portfolio to be responsive to changes in policy, technology, and customer preferences. Chevron aims to grow its traditional oil and gas business, lower the carbon intensity of its operations and grow lower carbon businesses in renewable fuels, hydrogen, carbon capture and offsets. To grow its lower carbon businesses, Chevron plans to target sectors of the economy where emissions are harder to abate or that cannot be easily electrified, while leveraging the company’s capabilities, assets and customer relationships. The company’s traditional oil and gas business may increase or decrease depending upon regulatory or market forces, among other factors.

In 2021, Chevron announced the following aspiration and targets that are aligned with its lower carbon strategy:

2050 Net Zero Upstream Aspiration Chevron aspires to achieve net zero for Upstream production Scope 1 and 2 GHG Emissions on an equity basis by 2050. The company believes accomplishing this aspiration depends on, among other things, partnerships with multiple stakeholders, continuing progress on commercially viable technology, government policy, successful negotiations for carbon capture and storage and nature-based projects, availability of cost-effective, verifiable offsets in the global market, and granting of necessary permits by governing authorities.

2028 Upstream Production GHG Intensity Targets These metrics include Scope 1, direct emissions, and Scope 2, indirect emissions from imported electricity and steam, and are net of emissions from exported electricity and steam. The targeted 2028 reductions from 2016 on an equity ownership basis include a:

•40 percent reduction in oil production GHG intensity to 24 kilograms (kg) carbon dioxide equivalent per barrel of oil-equivalent (CO2e/boe),

•26 percent reduction in gas production GHG intensity to 24 kg CO2e/boe,

•53 percent reduction in methane intensity to 2 kg CO2e/boe, and

•66 percent reduction in flaring GHG intensity to 3 kg CO2e/boe.

The company also targets no routine flaring by 2030. We have set 2016 as our baseline to align with the year the Paris Agreement entered into force, and the company plans to update the metrics every five years in line with the Paris Agreement stocktakes. We believe these updates will provide additional transparency on the company’s progress toward its net zero aspiration.

2028 Portfolio Carbon Intensity Target The company also introduced a portfolio carbon intensity (PCI) metric, which is a measure of the carbon intensity across the full value chain of Chevron’s entire business. This metric encompasses the company’s Upstream and Downstream business and includes Scope 1 (direct emissions), Scope 2 (indirect emissions from imported electricity and steam), and certain Scope 3 (primarily emissions from use of sold products) emissions. The company’s PCI target is 71 grams (g) carbon dioxide equivalent (CO e) per megajoules (MJ) by 2028, a greater than five percent reduction from 2016.

Planned Lower-Carbon Capital Spend through 2028 The company increased its planned capital spend to approximately $10 billion through 2028 to advance its lower carbon strategy, which includes approximately $2 billion to lower the carbon intensity of its traditional oil and gas operations, and approximately $8 billion for lower carbon investments in renewable fuels, hydrogen and carbon capture and offsets. We anticipate setting additional capital spending targets as the company

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Management's Discussion and Analysis of Financial Condition and Results of Operations

progresses toward its 2050 Upstream production Scope 1 and 2 net zero aspiration and further grows its lower carbon business lines.

Refer to “Risk Factors” in Part I, Item 1A, on pages 20 through 25 for further discussion of greenhouse gas regulation and climate change and the associated risks to Chevron’s business, including the risks impacting Chevron’s lower carbon strategy and its aspirations, targets and plans.

Response to Market Conditions and COVID-19 Commodity prices and demand for most of our products have largely recovered from the impacts of COVID-19 in 2020. However, some countries face a resurgence of the virus and its variants (e.g., Delta, Omicron) that could impact demand for some of our products (e.g., jet fuel), workforce availability, timing of project start-ups and materials movement and pose a risk to our business and future financial results.

Chevron’s operations have continued with a combination of on-site and at-home work, while monitoring local vaccine and transmission rates. In refining, the company continued to take steps to maximize diesel and motor gasoline production, given the decline in jet fuel demand.

In TCO, progress continued on FGP/WPMP. Staffing is at targeted levels and at the end of December 2021, over 90 percent of the TCO workforce on-site was fully vaccinated.

The effective tax rate for the company can change substantially during periods of significant earnings volatility. This is mainly due to mix effects that are impacted both by the absolute level of earnings or losses and whether they arise in higher or lower tax rate jurisdictions. As a result, a decline or increase in the effective income tax rate in one period may not be indicative of expected results in future periods. Note 17 Taxes provides the company’s effective income tax rate for the last three years.

Refer to the “Cautionary Statements Relevant to Forward-Looking Information” on page 2 and to “Risk Factors” in Part I, Item 1A, on pages 20 through 25 for a discussion of some of the inherent risks that could materially impact the company’s results of operations or financial condition.

The company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value and to acquire assets or operations complementary to its asset base to help augment the company’s financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods.

The company closely monitors developments in the financial and credit markets, the level of worldwide economic activity, and the implications for the company of movements in prices for crude oil and natural gas. Management takes these developments into account in the conduct of daily operations and for business planning.

Comments related to earnings trends for the company’s major business areas are as follows:

Upstream Earnings for the upstream segment are closely aligned with industry prices for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by OPEC+ countries, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control such as the COVID-19 pandemic, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of these factors could also inhibit the company’s production capacity in an affected region. The company closely monitors developments in the countries in which it operates and holds investments and seeks to manage risks in operating its facilities and businesses.

The longer-term trend in earnings for the upstream segment is also a function of other factors, including the company’s ability to find or acquire and efficiently produce crude oil and natural gas, changes in fiscal terms of contracts, the pace of energy transition, and changes in tax, environmental and other applicable laws and regulations.

The company is actively managing its schedule of work, contracting, procurement, and supply chain activities to effectively manage costs and ensure supply chain resiliency and continuity in support of operational goals. Third party costs for capital, exploration, and operating expenses can be subject to external factors beyond the company’s control including, but not limited to: severe weather or civil unrest, delays in construction, global and local supply chain distribution issues, the general level of inflation, tariffs or other taxes imposed on goods or services, and market based prices charged by the industry’s material and service providers. Chevron utilizes contracts with various pricing mechanisms, so there may be a lag before the company’s costs reflect changes in market trends.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Prices for goods and services in various sectors have risen over the past year. A key factor behind this trend is the accelerated demand for goods and transportation as companies restock materials and expand working inventories as a hedge against future disruptions. Shifts in the labor market continue to create issues for companies seeking to fill positions. Geographic mismatches between skills required and available labor, reductions in the overall labor supply, and perceptions of working conditions have resulted in tight labor markets.

As U.S. and international drilling activity continues to accelerate, continued upward market pressure is expected for oil and gas industry inputs (such as rigs and well services). The pace of economic growth and shifting spending patterns may lead to more cross-industry competition for resources, which could impact the cost of certain non-oil and gas industry goods and services.

The chart above shows the trend in benchmark prices for Brent crude oil, West Texas Intermediate (WTI) crude oil and U.S. Henry Hub natural gas. The Brent price averaged $71 per barrel for the full-year 2021, compared to $42 in 2020. As of mid-February 2022, the Brent price was $100 per barrel. The WTI price averaged $68 per barrel for the full-year 2021, compared to $39 in 2020. As of mid-February 2022, the WTI price was $95 per barrel. The majority of the company’s equity crude production is priced based on the Brent benchmark.

Crude prices increased in 2021 driven by production curtailment by OPEC+ countries and steadily increasing demand for transportation fuels. The company’s average realization for U.S. crude oil and natural gas liquids in 2021 was $56 per barrel, up 84 percent from 2020. The company’s average realization for international crude oil and natural gas liquids in 2021 was $65 per barrel, up 79 percent from 2020.

Prices for natural gas are more closely aligned with seasonal supply-and-demand and infrastructure conditions in local markets. In the United States, prices at Henry Hub averaged $3.85 per thousand cubic feet (MCF) during 2021, compared with $1.98 per MCF during 2020. As of mid-February 2022, the Henry Hub spot price was $3.93 per MCF.

Outside the United States, prices for natural gas depend on a wide range of supply, demand and regulatory circumstances. The company’s long-term contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices. Most of the equity LNG offtake from the operated Australian LNG projects is committed under binding long-term contracts, with some sold in the Asian spot LNG market. International natural gas realizations averaged $5.93 per MCF during 2021, compared with $4.59 per MCF during 2020. (See page 42 for the company’s average natural gas realizations for the U.S. and international regions.)

The company’s worldwide net oil-equivalent production in 2021 was a record 3.099 million barrels per day. About 27 percent of the company’s net oil-equivalent production in 2021 occurred in OPEC+ member countries of Angola, Equatorial Guinea, Kazakhstan, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait and Republic of Congo.

The company estimates that its net oil-equivalent production in 2022 will be flat to down 3 percent compared to 2021, assuming a Brent crude oil price of $60 per barrel and excluding the impact of asset sales that may close in 2022. This estimate is subject to many factors and uncertainties, including quotas or other actions that may be imposed by OPEC+; price effects on entitlement volumes; changes in fiscal terms or restrictions on the scope of company operations; delays in construction; reservoir performance; greater-than-expected declines in production from mature fields; start-up or ramp-up of projects; fluctuations in demand for crude oil and natural gas in various markets; weather conditions that may shut in

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Management's Discussion and Analysis of Financial Condition and Results of Operations

production; civil unrest; changing geopolitics; delays in completion of maintenance turnarounds; storage constraints or economic conditions that could lead to shut-in production; or other disruptions to operations. The outlook for future production levels is also affected by the size and number of economic investment opportunities and the time lag between initial exploration and the beginning of production. The company has increased its investment emphasis on short-cycle projects.

In January 2022, Chevron announced its intent to begin the process of exiting from its nonoperated interests in Myanmar. At December 31, 2021, the carrying value of the company’s assets was approximately $200 million.

Net proved reserves for consolidated companies and affiliated companies totaled 11.3 billion barrels of oil-equivalent at year-end 2021, an increase of 1 percent from year-end 2020. The reserve replacement ratio in 2021 was 112 percent. The 5 and 10 year reserve replacement ratios were 103 percent and 100 percent, respectively. Refer to Table V for a tabulation of the company’s proved net oil and gas reserves by geographic area, at the beginning of 2019 and each year-end from 2019 through 2021, and an accompanying discussion of major changes to proved reserves by geographic area for the three-year period ending December 31, 2021.

Refer to the “Results of Operations” section on pages 39 and 40 for additional discussion of the company’s upstream business.

Downstream Earnings for the downstream segment are closely tied to margins on the refining, manufacturing and marketing of products that include gasoline, diesel, jet fuel, lubricants, fuel oil, fuel and lubricant additives, petrochemicals and renewable fuels. Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products and petrochemicals, and by changes in the price of crude oil, other refinery and petrochemical feedstocks, and natural gas. Industry margins can also be influenced by inventory levels, geopolitical events, costs of materials and services, refinery or chemical plant capacity utilization, maintenance programs, and disruptions at refineries or chemical plants resulting from unplanned outages due to severe weather, fires or other operational events.

Other factors affecting profitability for downstream operations include the reliability and efficiency of the company’s refining, marketing and petrochemical assets, the effectiveness of its crude oil and product supply functions, and the volatility of tanker-charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refining, marketing and petrochemical assets, and changes in tax, environmental, and other applicable laws and regulations.

The company’s most significant marketing areas are the West Coast and Gulf Coast of the United States and Asia Pacific. Chevron operates or has significant ownership interests in refineries in each of these areas. Additionally, the company has a small but growing presence in renewable fuels.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Refer to the “Results of Operations” section on page 40 for additional discussion of the company’s downstream operations.

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.

Operating Developments

Key operating developments and other events during 2021 and early 2022 included the following:

Upstream

Angola Chevron’s affiliate, Cabinda Gulf Oil Company Limited (CABGOC), signed an agreement to extend the Block 0 concession for 20 years, through 2050.

Australia Sanctioned the Jansz-Io compression project, a part of the Gorgon development and an important source of natural gas supply to the Gorgon LNG facility.

Brazil Completed the sale of the company's 37.5 percent nonoperated interest in the Papa-Terra oil field.

Equatorial Guinea Announced the start-up and first LNG cargo from the Alen Gas Monetization Project.

Japan Announced the signing of a binding Sale and Purchase Agreement with Hokkaido Gas Co., Ltd. for the delivery of about a half million tons of LNG over a period of five years, starting in 2022.

United States Entered FEED for the Ballymore project, which is being developed as a subsea tieback to the existing Blind Faith facility, in the deepwater Gulf of Mexico.

United States Sanctioned the Whale project in the deepwater Gulf of Mexico.

Downstream

Finland Announced an agreement to acquire Neste Oyj’s Group III base oil business, including its related sales and marketing business, and brand NEXBASETM.

South Korea Chevron’s 50 percent owned affiliate, GS Caltex, started up an olefins mixed-feed cracker and associated polyethylene unit at its Yeosu refinery ahead of schedule and under budget.

United States Announced the commissioning and start-up of the world’s first commercial-scale ISOALKY™ process unit at the Salt Lake City Refinery. This proprietary technology uses ionic liquids to produce a high octane gasoline blending component as a cost-effective alternative to conventional alkylation technologies and offers environmental and process safety advantages.

United States Began producing renewable diesel at the El Segundo, California refinery by co-processing bio-feedstock.

United States Announced establishment of its first branded Compressed Natural Gas (CNG) station, as part of its plan to sell RNG through more than 30 CNG stations in California by 2025.

United States Acquired an equity interest in American Natural Gas LLC (now Beyond6, LLC) and its network of 60 compressed natural gas stations across the United States to grow its RNG value chain.

United States Announced the second expansion of its joint venture, Brightmark RNG Holdings LLC, to own projects across the United States to produce and market dairy biomethane, a RNG. First gas delivery at the Lawnhurst site in New York was announced in November.

United States Announced the launch of Havoline® PRO-RS™ Renewable Full Synthetic Motor Oil made with 25 percent sustainably sourced plant-based oils.

United States Celebrated the opening of the 1,000th ExtraMile Convenience store.

United States Chevron’s 50 percent owned affiliate, CPChem, announced the first commercial sales of their Marlex® Anew™ Circular Polyethylene, which uses advanced recycling technology to process pyrolysis oil, a feedstock made from difficult-to-recycle waste plastics.

United States Announced the signing of definitive transaction agreements to create a joint venture with Bunge North America, Inc., to own and operate soybean processing facilities.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Other

United States Announced the launch of Chevron’s $300 million Future Energy Fund II focused on technologies that have the potential to enable affordable, reliable, and ever-cleaner energy for all.

United States Announced plans with partners to develop carbon negative bioenergy in Mendota, California.

United States Announced memorandums of understanding with Toyota Motors North America, Inc. to explore a strategic alliance to catalyze and lead the development of commercially viable, large-scale businesses in hydrogen; with Cummins Inc. to explore a strategic alliance to develop commercially viable business opportunities in hydrogen and other alternative energy sources; with Delta Air Lines, Inc. and Google LLC to track sustainable aviation fuel test batch emissions data using cloud-based technology; and with Progress Rail Locomotive Inc., a Caterpillar company, and BNSF Railway Company to demonstrate hydrogen-fueled locomotives.

United States Acquired all of the publicly held common units representing limited partner interests in Noble Midstream Partners LP not already owned by Chevron and its affiliates.

United States Announced a collaboration agreement with Caterpillar Inc. to develop hydrogen demonstration projects in transportation and stationary power applications, including prime power.

United States Announced a letter of intent with Gevo, Inc. to jointly invest in building and operating one or more new facilities that process inedible corn to produce sustainable aviation fuel.

United States Announced agreement on a framework to acquire an equity interest in ACES Delta, LLC that owns the Advanced Clean Energy Storage project. This project aims to produce, store and transport green hydrogen at utility scale.

United States Announced a framework with Enterprise Product Partners L.P. to study and evaluate opportunities for carbon dioxide capture, utilization, and storage from their respective business operations in the U.S. Midcontinent and Gulf Coast.

United States Invested in companies to access lower-carbon technologies, including Baseload Capital AB (low-temperature geothermal and heat power), Starfire Energy (carbon-free ammonia and carbon-free hydrogen), Ocergy, Inc. (floating offshore and wind turbine technology), Mainspring (lower-carbon generators for electric grids), Raygen (solar-hydro plant with storage), Boomitra (soil carbon offset platform), Natel Energy (hydro-power based technology), Raven SR Inc. (modular waste-to-green hydrogen and renewable synthetic fuel facilities), Sapphire Technologies (waste energy recovery systems), Hydrogenious LOHC Technologies (liquid organic hydrogen carriers), gr3n SA (plastics recycling technology), Malta Inc. (thermal energy storage) and Ionomr Innovations Inc. (ion-exchange membranes and polymers).

Common Stock Dividends The 2021 annual dividend was $5.31 per share, making 2021 the 34th consecutive year that the company increased its annual per share dividend payout. In January 2022, the company’s Board of Directors increased its quarterly dividend by $0.08 per share, approximately six percent, to $1.42 per share payable in March 2022.

Common Stock Repurchase Program The company resumed stock repurchases in third quarter 2021 and purchased $1.4 billion of its common stock in 2021 under its stock repurchase program. The company currently expects to repurchase $1.25 billion of its common stock during the first quarter of 2022.

Results of Operations

The following section presents the results of operations and variances on an after-tax basis for the company’s business segments – Upstream and Downstream – as well as for “All Other.” Earnings are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. Refer to Note 14 Operating Segments and Geographic Data for a discussion of the company’s “reportable segments.” This section should also be read in conjunction with the discussion in “Business Environment and Outlook” on pages 32 through 37. Refer to the “Selected Operating Data” table on page 42 for a three-year comparison of production volumes, refined product sales volumes, and refinery inputs. A discussion of variances between 2020 and 2019 can be found in the “Results of Operations” section on pages 37 through 38 of the company’s 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021.

38

Management's Discussion and Analysis of Financial Condition and Results of Operations

U.S. Upstream

U.S. upstream reported earnings of $7.3 billion in 2021, compared with a loss of $1.6 billion in 2020. The increase was due to higher realizations of $6.9 billion, the absence of 2020 impairments and write-offs of $1.2 billion, higher sales volumes of $760 million, and higher asset sales gains of $640 million.

The company’s average realization for U.S. crude oil and natural gas liquids in 2021 was $56.06 per barrel compared with $30.53 in 2020. The average natural gas realization was $3.11 per thousand cubic feet in 2021, compared with $0.98 in 2020.

Net oil-equivalent production in 2021 averaged 1.14 million barrels per day, up 8 percent from 2020. The increase was due to an additional 162,000 barrels per day of production from the Noble Energy acquisition, partially offset by a 63,000 barrels per day decrease related to the Appalachian asset sale.

The net liquids component of oil-equivalent production for 2021 averaged 858,000 barrels per day, up 9 percent from 2020. Net natural gas production averaged 1.69 billion cubic feet per day in 2021, an increase of 5 percent from 2020.

International Upstream

International upstream reported earnings of $8.5 billion in 2021, compared with a loss of $825 million in 2020. The increase was primarily due to higher realizations of $7.6 billion, along with the absence of 2020 impairments and write-offs of $3.6 billion and severance charges of $290 million. Partially offsetting these increases are higher tax charges of $630 million, the absence of 2020 asset sales gains of $550 million, and higher depreciation expenses of $670 million and lower sales volumes of $540 million. Foreign currency effects had a favorable impact on earnings of $587 million between periods.

The company’s average realization for international crude oil and natural gas liquids in 2021 was $64.53 per barrel compared with $36.07 in 2020. The average natural gas realization was $5.93 per thousand cubic feet in 2021 compared with $4.59 in 2020.

International net oil-equivalent production was 1.96 million barrels per day in 2021, down 3 percent from 2020. The decrease was primarily due to the absence of 69,000 barrels per day following expiration of the Rokan concession in

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Indonesia, unfavorable entitlement effects, normal field declines and the effect of asset sales, partially offset by 113,000 barrels per day associated with the Noble Energy acquisition and lower production curtailments.

The net liquids component of international oil-equivalent production was 956,000 barrels per day in 2021, a decrease of 11 percent from 2020. International net natural gas production of 6.02 billion cubic feet per day in 2021 increased 6 percent from 2020.

U.S. Downstream

U.S. downstream reported earnings of $2.4 billion in 2021, compared with a loss of $571 million in 2020. The increase was primarily due to higher margins on refined product sales of $1.6 billion, higher earnings from 50 percent-owned CPChem of $1.0 billion and higher sales volumes of $470 million, partially offset by higher operating expenses of $150 million.

Total refined product sales of 1.14 million barrels per day in 2021 increased 14 percent from 2020, mainly due to higher gasoline, jet fuel, and diesel demand as travel restrictions associated with the COVID-19 pandemic continue to ease.

International Downstream

International downstream earned $525 million in 2021, compared with $618 million in 2020. The decrease in earnings was largely due to lower margins on refined product sales of $330 million and higher operating expenses of $100 million, partially offset by a favorable swing in foreign currency effects of $337 million between periods.

Total refined product sales of 1.32 million barrels per day in 2021 were up 8 percent from 2020, mainly due to the second quarter 2020 acquisition of Puma Energy (Australia) Holdings Pty Ltd. and higher diesel and gasoline demand, partially offset by lower jet fuel demand.

All Other

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies.

Net charges in 2021 decreased $50 million from 2020. The change between periods was mainly due to the absence of 2020 severance, Noble acquisition and mining remediation costs, and lower corporate charges, partially offset by higher employee benefit costs and a loss on early retirement of debt. Foreign currency effects decreased net charges by $27 million between periods.