Chevron to buy back US$75b in stock after record profit

CHEVRON plans to buy back US$75 billion of shares and increase dividend payouts after a year of record profits that evoked angry denunciations from politicians around the world as soaring energy prices squeezed consumers.

The stock repurchase programme will kick in Apr 1 and will be triple the size of the previous authorisation unveiled in early 2019, the company said in a statement on Wednesday (Jan 25). The programme is equivalent to almost one-fourth of the company’s market value and five times the current level of annual buybacks.

Although Chevron’s plan pales in comparison to the US$89 billion that Apple allocated to repurchases in the past year, it’s likely to incense critics in the White House and Congress who accused the oil industry of war profiteering after Russia’s invasion of Ukraine sent energy prices surging.

US President Joe Biden was among those who lambasted oil explorers for devoting cash to shareholder-friendly initiatives like dividends and buybacks instead of ploughing it into more drilling that would swell crude supplies. Chevron rose as much as 3.9 per cent in after-hours trading.

The company also will pay investors a US$1.51-a-share dividend on Mar 10, a 6.3 per cent increase from the previous quarter.

Even though energy prices have pulled back since the early phases of Russia’s initial attack on Ukraine, analysts expect US oil companies’ profits to stay strong because they have kept capital spending in check, unlike in previous boom cycles. Instead, the windfall has been used to pay back debt and increase investor returns.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Chevron raised share buybacks multiple times last year as oil prices rose, but chief financial officer Pierre Breber has pledged to maintain the repurchase rate even as commodity prices pull back. With net-debt ratios currently below the company’s target range, Chevron is willing to let borrowing levels rise to keep buying back shares if needed, Breber said last year.

The company last year announced that capital spending for 2023 will be at the top end of its guidance range at US$17 billion. Chevron is scheduled to report fourth-quarter results on Jan 27. BLOOMBERG