What happened

Shares of oil giant Chevron (CVX -0.87%) jumped 2.6% this morning and raced toward an all-time high price within minutes of the market's opening as investors cheered the oil stock's latest quarterly numbers.

Chevron blew third-quarter earnings out of the water, handily beating Wall Street estimates and racking up huge profits and cash flows. It was, in fact, Chevron's second-most profitable quarter ever.

So what

Chevron's third-quarter net income surged 83.6% year over year to $11.2 billion, driven primarily by a solid showing from its upstream segment. To make the most of high oil prices, Chevron invested aggressively and boosted production at the Permian Basin by 12% year over year.

Higher production, coupled with big jumps in its average realized prices for crude oil and natural gas liquids, sent Chevron's earnings for upstream operations zooming. In the U.S., for example, Chevron sold crude oil and natural gas for average prices of $76 per barrel and $7.05 per thousand cubic feet in Q3, up significantly from its year-ago quarter's average realized prices of $58 per barrel and $3.25 per thousand cubic feet.

Meanwhile, high refining margins boosted Chevron's earnings from its downstream business during the quarter. The business could have delivered much stronger numbers, though, if not for planned turnarounds that hit refinery operations in the U.S.

Now what

Chevron is firing on all cylinders. Its cash flow from operations hit a record $15.3 billion in Q3 and made up almost 40% of all the cash from operations that the company generated in the nine months ending Sept. 30. The oil giant prudently used the money to pare down debt, invest in growth, and reward shareholders.

So between Dec. 31, 2021 and Sept. 30, 2022, while Chevron's total debt fell by almost 25%, its cash and cash equivalents balance skyrocketed by nearly 170%. In the third quarter alone, Chevron repurchased shares worth $3.75 billion and paid $2.7 billion in dividends, or 6% higher than its year-ago quarter thanks to a dividend hike earlier this year.

Chevron's booming cash flows have lifted investors' hopes of another impressive dividend raise next year, and that's just one of the reasons why they bet on this 3.3%-yielding oil stock today.