CHEVRON CORP (CVX) stock intrinsic value fair value estimate & owner earnings analysis

What the business is. Chevron is one of the two large US integrated oil companies. Most of its cash comes from producing oil and natural gas (the Permian Basin in Texas and New Mexico, the DJ Basin in Colorado, the Gulf of America, Australia's Gorgon and Wheatstone LNG plants, Israel's Leviathan and Tamar gas fields, its 50% stake in Tengizchevroil in Kazakhstan and, since the all-stock purchase of Hess closed in July 2025, a 30% stake in the Stabroek block offshore Guyana plus the Bakken in North Dakota). Refining, marketing and its 50% stake in Chevron Phillips Chemical add a smaller and also cyclical stream. Earnings rise and fall with oil and gas prices, so the key question is not last year's result but what the business earns across a full price cycle. How we measured earnings. We start from cash from operations, strip out swings in working capital, charge stock-based pay as a real cost, and deduct all capital spending as the cost of staying in business. We treated every dollar of capital spending as maintenance because Chevron's revenue moves with prices, not volumes, and its capital spending ($8.1-18.1 billion a year) stayed below depreciation and depletion every year from 2016 to 2025; an oil producer must keep drilling just to replace what it pumps. On that basis owner earnings per share over the last ten years were: 2016 -$3.06, 2017 $3.19, 2018 $9.08, 2019 $5.97, 2020 $1.67, 2021 $11.32, 2022 $17.75, 2023 $12.22, 2024 $7.28, 2025 $9.23. Adding back cash interest gives the cash the business produces before its lenders, which is what we value: the ten-year median is about $8.50 per share. That window holds two genuine busts (the 2015-2016 oil collapse and the 2020 shutdown) and one boom (2022), so we treat it as a full cycle and use $8.50 as the normal level. We did not move the level up for the very strong second quarter of 2026 (net income of $12.1 billion in one quarter): a single quarter driven by prices is not a new normal. Growth check: 2025 business cash flow per share rose about 28% over 2024; our base case starts year one only about 5% above the $8.50 level. What the Hess deal did. Hess holders received roughly 300 million new shares, taking the diluted count to about 1.98 billion. Hess's Guyana fields were still being built out, so on today's cash the deal roughly breaks even per share once the cost savings are included, and the gain comes from fields already under construction. The Stabroek block has three more sanctioned developments: Uaru (250,000 barrels a day gross, first oil expected 2026), Whiptail (250,000, 2027) and Hammerhead (150,000, sanctioned September 2025, 2029). Chevron's 30% share is about 195,000 barrels a day. The big date that cuts the other way. Tengizchevroil operates the Tengiz and Korolev fields under a concession that expires in 2033. The Future Growth Project there was completed in 2025 and cash is now flowing back to Chevron (distributions from affiliates exceeded their earnings by $2.3 billion in 2025). No extension has been signed, so the base and bear cases assume Chevron's roughly $2.5 billion a year (about $1.25 per share) from Tengiz ends in 2033. Base case (about $127 per share). Normal earning power of $8.50 per share, plus about $0.18 from cost savings already in the run rate (the company reports $2 billion of annual structural savings achieved against a $3-4 billion target; only the achieved part is counted), plus the three sanctioned Guyana projects at roughly $22 a barrel of cash to Chevron, adding about $0.79 per share by 2030. Tengiz cash ends in 2033. After year ten the business holds steady at about $8.22 per share: Chevron has replaced its produced reserves for decades through the same level of capital spending we already charge, and that engine is what carries the long tail. The business is worth about $143 per share (about $282 billion); net debt and minority interests come to about $15.60 per share, leaving about $127. Bear case (about $59 per share). An oil downturn like 2020 hits now: two years at about $2 per share, a recovery year, then a normal level of only $6.40 (what the business produced in 2019, a year of middling prices) with Uaru and Whiptail earning only $15 a barrel, no further cost savings, Tengiz ending in 2033 and a second slump of the 2015-2016 kind in years nine and ten. After that the business earns a through-the-cycle $4.55 per share. That is worth about $75 per share as a business, about $59 after debt. Even at the trough, cash flow of about $3 billion still covers interest of roughly $1.5 billion; in 2020 Chevron's debt rose while it kept paying a rising dividend, and it could do so again. Bull case (about $172 per share). The current high-price environment seen in the first half of 2026 lasts about a year, the normal level is $10.50 per share (closer to 2023-2025 results), the Guyana projects earn about $26 a barrel, and Tengiz is extended past 2033 on terms worth half of today's cash. The business would be worth about $187 per share, about $172 after debt. Debt. At June 30, 2026 Chevron owed about $37.1 billion (including about $3.7 billion of Hess Midstream debt that Chevron does not guarantee) against $8.5 billion of cash. Outside owners of Hess Midstream and other partly owned units hold about $5.7 billion that we subtract because their cash flows are counted in full. Much of the debt carries cheap fixed coupons (cash interest runs about 3.8% of the balance), which lowers its true burden by about $3.4 billion over the next five years. Net, about $30.8 billion, or $15.60 per share. Commercial paper ($4.6 billion at year-end 2025) is rolled routinely and no maturity or covenant threatens any case. Total debt rose from $24.5 billion at the end of 2024 to $40.8 billion at the end of 2025 because of the Hess deal and has since begun to fall. Margin-of-safety price: $75. How sure are we of the earnings level? Only moderately. Ten years of results run from -$3 to $18 per share, and that spread is the business, not noise. The $8.50 level rests on a cycle that included two busts, which gives us some comfort, but prices decide almost everything. The worst plausible outcome is a long price collapse like 2015-2016, with Tengiz lost in 2033 and trouble in Kazakhstan's export pipeline (the Caspian Pipeline Consortium carries most Tengiz oil through Russia). The balance sheet would get through it: net debt is about a fifth of the business's value even in the bear case, and the assets are long-lived and spread across many countries. If we are wrong about the normal level (if $6.40, not $8.50, is the truth), the base case drops to about $92. If we are wrong about Tengiz in the other direction, value rises. The price assumes a three-to-five-year holding period, during which the company pays about $7.30 a share a year in dividends (total dividends paid rose every year from 2017 through 2025, including through 2020). From $75, a return to the base case within four years, plus dividends, implies about 20% a year; the bear case implies roughly the starting price back plus dividends. Above that, the bear case implies a real loss while the base case no longer reaches 20%. Changes since our previous review. Our earlier figures were built on a different basis and are not comparable. What is new in the business itself: the cost savings achieved in 2025, the Hammerhead sanction, the completion of the Tengiz expansion, and the 2033 Tengiz concession date, which we now price in. Things we could not fully reconcile: Chevron's cash-flow statement does not show stock-based pay as its own line, so we took it from the share-based pay note; in 2023 that charge was slightly negative because cash-settled awards were marked down. A small part of each year's operating cash flow sits in "other" lines that the filings do not break out.