Chevron Corporation (CVX)

Chevron is an American petroleum corporation headquartered in San Ramon, California. It was established in the early 20^th century after Pacific Oil Company and Standard Oil Company of Iowa merged.

Chevron’s petroleum operations involve exploration, production, refining, marketing and research. The company produces geothermal energy, various petrochemicals and polymers, and owns coal and mineral mining interests.

Chevron started from its humble beginnings in California and soon became a major player in the international oil market.

Chevron is one of the biggest global energy corporations that has maintained an ongoing presence in the Kingdom of Saudi Arabia for over seventy years. Their involvement in the kingdom encompasses diverse petroleum-related activities through their subsidiary Saudi Arabian Chevron Inc. They also collaborate with Saudi Aramco, the national oil company, and work with multiple government partners in the area.

While Chevron had a secure position in the Middle East in the early 1970s, its operations were disrupted after the establishment of the Organisation of Petroleum Exporting Countries (OPEC). Chevron had long relied on foreign supplies and with its

acquisition of Gulf Corporation for $13.2 billion in 1984, it didn’t manage to bring Chevron to its pre-1973 performance levels. It would be later in the mid-1990s that strong earnings will start making a difference along with restructuring efforts and cost-effective measures. Other acquisitions include Texaco Inc. in 2001, and Unocal Corporation in 2005.

Chevron’s history

Chevron’s history begins back in 1879 with the creation of the Pacific Coast Oil Company by Frederick Taylor, making it California’s biggest oil producer and refiner. In 1900 the Standard Oil Company bought Pacific Coast Oil and in 1906 it united it with its West Coast operations, including Iowa Standard, to found the Standard Oil Company.

Becoming independent: Socal

In 1911, the California-based company became an independent company while in 1926 it acquired the properties of Pacific Oil Company and became known as the Standard Oil Company of California, or Socal. With wells and refineries across California and Texas, Socal became the main oil company in the western United States.

In the early 1930s, it experienced significant expansion following the discovery of oil in Bahrain and Saudi Arabia. In 1933 Socal created the California Arabian Standard Oil Company or Casoc. When in 1936 the Texas Company (Texaco) was integrated with Casoc, the Caltex group of companies was created, owned by Socal and Texaco. In 1944, Casoc changed its name to the Arabian American Oil Company (Aramco).

In 1939, Socal expanded its operations in Louisiana and the Gulf of Mexico, while in 1941 it began Canadian production.

Postwar era

By 1949, Socal amassed $1 billion in assets. It had also added new facilities in Bakersfield, California, and in Salt Lake City, Utah. The Rocky Mountains remained the heart of Socal territory where the company controlled about 28% of the retail market during the post-war years.

Oil became central to the US economy in the two decades following the war. The Middle East, Latin America, and Southeast Asia also contributed to oil pushing the price of oil lower in real dollars. The massive growth in world consumption boosted Socal’s sales and profits.

By 1957, Socal was selling $1.7 billion worth of oil products annually and increased profits in the period between the 1950s and 1960s.

Dependency on Middle Eastern oil

With the production of crude oil in California declining, Socal and many world companies became dependent on Middle Eastern oil. By 1961, it had bought the Standard Oil Company (Kentucky) and expanded into the southeastern states. But the addition of domestic production didn’t erase the fact that Socal remained dependent on Saudi Arabian oil.

Socal managed to boost profits by selling its Middle Eastern oil in Europe and Asia, during the 1960s and by 1970, 20% of its sales were made in the Far East. In  Europe, Socal and Texaco owned 8,000 gas stations up until 1967.

The oil industry in the 1970s

Consumption in the 1970s increased, along with shortages of oil. The base price of oil increased after OPEC took control of oil in 1973 and 1974.

With oil politics changing, Socal found it difficult to meet global and local demand. To respond to the changing environment, Socal decided to merge all of its domestic marketing under the brand Chevron USA. It explored new domestic alternatives as well as other sources of energy such as coal, shale, and uranium. In 1984, Standard Oil Company (California) was renamed Chevron Corporation. The same year, it bought Gulf Corporation in an attempt to minimise its dependence on the Middle East and maintain its oil and gas reserves. Following this merger, Chevron expanded its operations in more than 90 countries.

Chevron in the 1990s

In the early 1990s, there was more pressure on oil companies to prove responsibility towards the environment. Chevron began advertising its environmental programs, while between 1989 to 1993 Chevron Shipping Company showcased the best overall safety record among crucial oil companies.

In terms of profits, Chevron’s sales in the 1990s were not attractive. Its 1989 results were weak, so the company took several initiatives and tried to cut costs and improve efficiency. In 1993, Chevron partnered with the Republic of Kazakhstan to develop the oil field of Tengiz.

Chevron continued its cutbacks and efficiency attempts, and in 1995 it redirected its marketing efforts towards service and sales growth. In 1997, Chevron and McDonald’s opened a new gas station and food service in Lakewood, California.

Through its various efforts of restructuring and cutting costs, as well as higher gasoline prices, Chevron’s earnings finally increased in 1996 with stockholder return reaching up to 28.5%. The company benefited from high crude prices by growing the production at its Kazakhstan and West African facilities.

In 2001 Chevron created ChevronTexaco Corporation after acquiring Texaco. In 2005, the company was renamed the Chevron Corporation and bought Unocal, with oil and gas fields in the Gulf of Mexico and Asia. This expansion strengthened Chevron and placed it in second place behind Exxon Mobil.

Chevron and Cyprus

Chevron and the Cypriot government have recently discussed the possibility of using the Aphrodite gas field— an offshore gas field located at the exploratory drilling block 12 in the country’s maritime Exclusive Economic Zone—for Cyprus’ local electricity production.

According to Energy Minister George Papanastasiou, Chevron was open to supplying Cyprus with natural gas from the Aphrodite field, which would then be used to fuel Cyprus’ electricity production. Any extra natural gas can be used for liquefaction in Cyprus or another country.

Chevron shareholders reject climate change proposals

Both ExxonMobil and Chevron shareholders have shown support for climate change proposals at the US oil majors’ annual meetings on Wednesday, according to the Financial Times.

Similar proposals relating to global warming have found more support from shareholders of European oil companies than from US oil companies. A proposal at Chevron attracted less than 10% support.

The US oil companies have avoided establishing targets for emissions from the consumption of their products. The main reason is that they would be forced to reduce oil and natural gas production at a time when both of the companies plan to increase output. In May 2023, Chevron paid $6.3bn to buy US shale producer PDC Energy in an attempt to increase its oil and gas reserves.

Disclaimer:

This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.