Last year was a transformational year for Chevron (CVX 0.70%). The global oil and gas giant set production records, started up several major growth projects, and significantly strengthened its portfolio by closing its acquisition of Hess. These catalysts enabled Chevron to grow its adjusted free cash flow by 35% even as oil prices fell 15%, allowing it to return a record $27 billion to shareholders through dividends and repurchases.
Chevron's strong execution last year sets the stage for even better performance in 2026. It could have the fuel to be the top-performing oil stock by the end of this year.
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Ramping up in 2026
Chevron started up several major growth capital projects last year, including Ballymore and Whale in the Gulf of Mexico (also known as the Gulf of America in the U.S.) It also completed its Future Growth Project in Kazakhstan last year. Additionally, the company anticipates bringing more capacity online at its Leviathan field in Israel early this year.
Those projects, along with a full year of production from its recently acquired Hess assets, put Chevron on pace to increase its output by 7% to 10% this year. That's a meaningful production increase from a company of its size (Chevron produced 3.7 million barrels of oil equivalent per day last year). The company also remains on track to deliver $3 billion to $4 billion in structural cost savings by the end of this year.
NYSE: CVX
Key Data Points
This combination of growing production and falling costs supports Chevron's expectation that it will reach a free cash flow inflection point this year. At $70 oil, the company can generate $12.5 billion in additional free cash flow this year, compared to its 2025 record level, assuming oil averages $70 a barrel (it's currently around $68).
Major additional upside catalysts
Chevron's strong execution last year sets it up to deliver robust production and free cash flow growth in 2026 at the current oil price point. It could produce significantly more cash this year if oil prices rise above $70. Any number of catalysts could drive oil prices higher, including the growing tensions between the U.S. and Iran.
An underappreciated upside catalyst for Chevron is Venezuela. The company has operated in the country for more than a century. It has worked over the past few years to increase the production of its ventures in the country by over 200,000 barrels of oil per day. It has significant additional potential in the country, which could be free to unlock after the U.S. military arrested former Venezuelan president Nicolás Maduro. The company believes it could increase its production volumes in the country by up to 50% over the next 18 to 24 months. Positive news announcing it's boosting its volumes in the country could bolster its stock price.
High-octane total return potential
Chevron expects to reach a major inflection point in producing free cash flow this year. It has additional upside catalysts from the potential for higher oil prices and an increase in its Venezuelan volumes. These factors could give Chevron stock the fuel to be the sector's top performer this year.
