Key Highlights

  • Chevron closed at USD 173.63 on June 18, down 2.22%, with volume near 18.31 million shares.
  • CVX traded around USD 175.75 pre-market on June 22, up roughly 1.22%.
  • Project Kilby is expected to deliver 2.67 gigawatts of dedicated power to Microsoft from 2028.

Chevron Corporation (NYSE:CVX) rose about 1.22% in pre-market trading on June 22, reaching USD 175.75 after closing at USD 173.63 on June 18.

The move followed the announcement of a 20-year power purchase agreement with Microsoft for a large co-located power and data-centre development in West Texas.

The project, known as Kilby, is expected to provide approximately 2.67 gigawatts of dedicated electricity to a Microsoft-operated data centre. The agreement gives Chevron exposure to the rapid growth of artificial intelligence and cloud-computing infrastructure while reducing reliance on traditional commodity-price cycles.

The stock had fallen 2.22% in the previous session as crude prices weakened sharply after geopolitical tensions eased and the Strait of Hormuz reopened.

Why the Microsoft Agreement Matters

AI data centres require large volumes of reliable electricity. Power availability has become one of the biggest constraints on new infrastructure development, particularly as hyperscalers expand advanced computing capacity.

Chevron’s project is designed to provide dispatchable power directly to Microsoft without placing the full burden on the regional grid.

The long-term contract creates potential revenue visibility that differs from Chevron’s conventional upstream business, where cash flow is more directly tied to oil and gas prices.

Management expects the project to generate mid-teen returns and produce diversified cash flow independent of commodity-price cycles.

Project Kilby Adds Scale to Chevron’s AI Power Strategy

Kilby is expected to be built in phases, allowing capacity to expand incrementally.

Most of the power generation will use large GE Vernova turbines, with additional capacity supplied by Solar Turbines, a Caterpillar subsidiary.

First power delivery is targeted for 2028, while Chevron expects to make a final investment decision by the end of 2026, subject to remaining conditions.

At 2.67 gigawatts, the project would rank among the largest co-located natural gas power and data-centre developments in the United States.

Company Background

Chevron is one of the world’s largest integrated energy companies, with operations spanning oil and gas production, refining, chemicals and emerging energy businesses.

Its traditional strengths include Permian Basin production, large-scale project execution and access to natural gas supply.

The Microsoft agreement allows Chevron to use those capabilities in a new market where electricity reliability, speed of deployment and long-term contracting are increasingly valuable.

Oil Prices Still Shape the Near-Term Outlook

The power deal improves strategic diversification, but Chevron remains heavily exposed to crude oil and natural gas prices.

The stock’s latest decline reflected a pullback in oil after a US-Iran interim peace agreement reduced fears of supply disruption and reopened the Strait of Hormuz.

That creates a mixed valuation backdrop. AI power infrastructure may support longer-term cash-flow diversification, but near-term earnings remain sensitive to commodity prices, refining margins and production trends.

Valuation and Financial Position

At the June 18 close, Chevron had a market capitalisation of about USD 345.80 billion, a P/E ratio near 30.20 and EPS of approximately USD 5.75.

The dividend yield stood near 4.02%, supporting the stock’s appeal among income-focused investors.

However, Project Kilby will require significant capital and execution discipline. Investors will want evidence that the expected mid-teen returns justify the investment and that development remains on schedule.

Economic and Infrastructure Impact

Chevron expects the project to generate more than USD 10 billion in state and local tax revenue and support nearly 2,000 jobs.

The company also plans to use non-potable brackish groundwater rather than freshwater for operations and is evaluating the reuse of produced water from oil and gas activities.

Environmental controls are expected to include technologies intended to reduce nitrogen oxide emissions and limit noise and light impacts.

What Investors Are Watching Next

Investors will watch Chevron’s final investment decision, project financing and construction schedule.

Markets will also focus on Microsoft’s capacity commitments, power-pricing economics, natural gas costs and whether Chevron signs similar agreements with other hyperscalers.

Oil prices will remain the most important near-term driver of earnings and share-price performance.

Conclusion

Chevron’s pre-market gain reflects the strategic importance of its 20-year Microsoft power agreement.

Project Kilby gives the company a direct role in the AI infrastructure buildout and creates a potential source of long-duration cash flow outside the traditional oil cycle.

The opportunity is substantial, but the valuation impact will depend on capital discipline, timely construction and whether Chevron can replicate the model across additional data-centre developments.