Chevron Beats Profit Estimates And Announces Share Buyback

Chevron Corp announced a share buyback program with it reporting its highest profit in six quarters as the oil and gas firm joined other industry peers to share profits with shareholders with a rebound in crude oil prices pushed earnings and cash flow to levels before the pandemic hit.

An increase in demand and use of fuel has buckled the pandemic losses because of weather demands – pushing oil and gas sticks trading near multi-year highs. Crude is trading above $70 a barrel mark also because of OPEC’s decision to carry production curbs into next year.

However Chevron also cut down on its annual spending forecast to about $13 billion which is a target below its spending last year. The company had previously set a budget of between $14 billion and $16 billion a year in annual capital and exploratory spending till 2025.

Its spending was cut last year by Chevron to hold its profits at more than $50 a barrel. The company reported its highest cash flow in two years due to lower costs and higher prices which allowed the company to pare debt and restart buying back shares, said company officials.

Chief Executive Michael Wirth said that the company will resume share buybacks this quarter at an annual rate of between $2 billion and $3 billion which is about half of the annual purchase value that the company had planned.,

The hit to oil demand early last year because of the Covid-19 pandemic forced the company to suspend share buyback.  

“We’ve always said we would begin buybacks when we were confident that we could sustain it, and our breakeven is $50 per barrel and we are now well above it,” Chief Financial Officer Pierre Breber said.

“We’re trying to win back investors…demand for our products has fully recovered, demand for our stock is recovering.”

For the quarter ended June 30, the compoany earned $3.18 billion from oil and gas production compared to a loss of $6.09 billion for the same period a year ago.

Last quarter, $54 a barrel was the sale price of US oil for the second largest US producer compared to the rate of $19 a barrel in the same period a year ago. The company reported its total oil and gas production increasing by 5 per cent year ion on year to 3.13 million barrels per day.

The output of oil from the Permian basin is expected to remain almost same as last year’s, Chevron said, but added that it will add drilling rigs in the second half in the basin.  Its production rate from the top US shale basin is expected to be 600,000 barrels of oil equivalent per day by the end of the year.

Chevron’s peers Royal Dutch Shell, TotalEnergies and Equinorare also resuming share buybacks to distribute profits with shareholders.

Till June this year, the price of crude oil prices were up 57 per cent while there was also an improvement in the hard-hit refining and chemicals business segments as the company managed better rates of plant utilization and margins – mostly moving higher.

(Adapted from USNews.com)

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