Chevron (CVX): Record $12.1B Quarter, EPS $6.11 — But Brent Was $104 | Q2 2026

Chevron Corporation (CVX) Q2 2026 — Net income $12,072M ($6.11/diluted share) vs $2,490M ($1.45). Adjusted $11,977M ($6.06), ~41c above consensus - the largest quarterly profit since 2022. Revenues $67,199M, +51.4%. Production 4,070 MBOED, +20%. Free cash flow $18,095M. ROCE 21.4%. Average Brent: $104/bbl vs $68. Chevron's Q2 2026 is the biggest quarter it has printed since 2022, and almost all of the year-over-year increase is a price: average Brent spot was $104/bbl against $68 a year ago, and Chevron's own release says so. Net income $12,072M ($6.11 GAAP, $6.06 adjusted, a ~41c beat), production 4,070 MBOED (+20%, credited to legacy Hess assets first), free cash flow $18,095M in one quarter, and total debt down a record $8.4B. Execution was excellent - record U.S. output, 97% refinery utilisation, $3B of cost cuts six months early, $1.5B of Hess synergies 50% above target. But $1.4B of favourable timing effects, downstream earnings up 6.6x on crack spreads that lost $1,013M in Q1, and DD&A of ~$24.3B against ~$18B of capex do not repeat at a mid-cycle barrel. Normalise to $75 Brent and we get ~$22B of mid-cycle free cash flow and a DCF of ~$170 - about 12% below the $192.31 close. AVOID, 3/5. THE CALL: AVOID (3/5, A RECORD QUARTER, PRICED OFF A $104 BARREL) — base-case value ~$170.0 vs ~$192.31 today. KEY METRICS: - Q2 2026 = three months ended June 30, 2026; reported pre-open 2026-07-31 - Net income $12,072M vs $2,490M; GAAP EPS $6.11 vs $1.45; ROCE 21.4% vs 6.2% - Adjusted earnings $11,977M / $6.06 - ~41c above the Bloomberg consensus - GAAP EPS is HIGHER than adjusted: special items were a NET BENEFIT of $144M (+$230M asset sale gain, -$86M pension settlement) - Average Brent spot $104/bbl vs $68 a year ago - the biggest driver of the print - Release discloses $1.4B of FAVOURABLE TIMING EFFECTS (derivative MTM + LIFO) - Production 4,070 MBOED vs 3,396 (+20%); U.S. a record 2,077 MBOED; Hess credited first - Upstream: U.S. $3,541M (from $1,418M); Int'l $4,641M (from $1,309M) - Downstream: U.S. $2,411M (from $404M); Int'l $2,457M (from $333M); All Other -$978M - Realizations: U.S. liquids $70.80/bbl (from $47.77); Int'l $96.41 (from $58.88) - U.S. natural gas realization FELL to $0.91/mcf from $1.75 (Permian associated gas) - Record U.S. refinery crude inputs 1,070 MBD at 97%+ utilisation; int'l inputs -10% - CFFO $22,633M (vs $8,576M); capex $4,538M; FREE CASH FLOW $18,095M in the quarter - Total debt cut by a record $8.4B to $37,075M; debt ratio 16.3%, net debt ratio 13.1% - Returns $6.6B: $3,504M dividends + $3,117M buybacks; dividend declared $1.78/share - $3.0B structural cost cuts hit SIX MONTHS EARLY; $1.5B Hess synergies in year one, 50% above target - Signed a 20-year, ~2.67 GW behind-the-meter power agreement with Microsoft (West Texas) - DD&A ~$24.3B annualised vs ~$18B capex - depletion running ahead of the capital budget - Our model: ~$22B mid-cycle FCF at $75 Brent; DCF $170 base, $110 bear ($65), $263 bull ($90) - Street: $206.93 avg target, median $210, range $174-$230, 34 Buy/15 Hold/4 Sell - all PRE-print What to watch: Bull: the buyback holding at $3B+ a quarter through a quarter with Brent averaging below $80 - that proves the ~$26.5B of annual shareholder return is funded by the asset base, not the war; base case then moves toward $200. Bear: a buyback cut below $2.5B on a lower Brent, downstream earnings back under $1B (where they were in Q1 2026), or a 2027 capex budget above $20B. Any two and fair value is nearer $140. Real buyers around $145. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.