DBRS Confirms the Ratings of Chevron Corporation at AA (low) with Stable Trends

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Notes and Debentures rating of Chevron Corporation (Chevron or the Company) at AA (low), both with Stable trends. The rating action is supported by Chevron’s relatively strong business profile that includes (1) a substantial and well-diversified upstream portfolio with production of ~2.9 million barrels of oil equivalent per day; (2) significant downstream integration (1.6 million barrels per day of net refining capacity) that provides a natural hedge, particularly during a weak crude oil pricing environment; and (3) an adequate liquidity position. The ratings also reflect Chevron’s relatively higher business risks associated with its operations in politically sensitive geographic regions and exposure to higher-risk deepwater operations.

While having improved materially, the Company’s main credit metrics remain outside the AA rating range. With higher oil and gas prices, an increase in upstream production observed year to date and reduced debt, Chevron’s financial profile improved in the last 12 months ended September 30, 2018. Chevron incurred a free cash flow (cash flow after capital expenditures and dividends) surplus of $1.7 billion for the first nine months of 2018 compared with a deficit of over $1.0 billion for the first nine months of 2017. DBRS expects Chevron’s capital flexibility to continue to improve further as major capital projects have been completed and the Company’s future investment commitments decline.

DBRS estimates that ~44% of Chevon’s long-term capital markets debt will mature by year-end 2020. However, DBRS views Chevron’s debt maturity profile as manageable given its adequate liquidity and strong access to capital markets. DBRS anticipates Chevron to remain free cash flow positive through 2020. The improved cash flow generation is on the back of improved oil and gas prices (DBRS 2019–20 Brent oil price forecast of $65 per barrel (bbl)), increased production and an improving cost structure. If Chevron continues to deleverage, DBRS notes it may take a positive rating action. However, if crude oil prices were to weaken materially again (below $40/bbl) and cause Chevron’s credit metrics to return to 2016 levels for an extended time period, DBRS could take a negative rating action.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating Companies in the Oil and Gas and Oilfield Services Industries (August 2018), which can be found on dbrs.com under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.