In This Article:
(Bloomberg) — Chevron Corp. (CVX) raised dividends by 5% even as profit underperformed expectations amid shrinking crude prices and fuel-making margins.
Most Read from Bloomberg
Adjusted fourth-quarter earnings were $2.06 a share, a nickel below the average estimate of analysts in a Bloomberg survey. The miss came a day after competitor Shell Plc (SHEL) also disclosed disappointing end-of-year profits.
Despite the weak result, Chief Executive Officer Mike Wirth is betting the start-up of the giant Tengiz project in Kazakhstan and renewed capital-spending restraint will improve finances amid global supply-and-demand uncertainty.
“We’re building from strength to strength and have $10 billion of additional free cash flow growth through the end of 2026,” Wirth said in an interview. New projects in Kazakhstan and the newly-named Gulf of America will drive the increase, he said.
There are signs his plan is working. Chevron shares are up almost 8% this year, dwarfing the 1.9% advance of arch rival Exxon. Output from the Tengiz project, which is operated and 50% owned by Chevron, will ramp up to 1 million barrels a day later this year.
Brent crude averaged about $74 a barrel in the fourth quarter, down 11% from a year earlier, putting pressure on the industry’s ability to fund hefty shareholder payouts without resorting to debt. Refining margins also contracted.
Chevron generated $4.4 billion in free cash flow during the quarter, short of the roughly $7.5 billion doled out in the form of dividends and buybacks. Wirth has previously noted his preference for repurchasing shares through the commodity-price cycle, even if it means increasing debt.
The company will lower capital spending this year for the first time since the pandemic. The move signals an effort to harvest cash flow from the Permian Basin while slowing growth. That’s in contrast to Exxon Mobil Corp., which is increasing outlays as it pursues long-term growth.
Chevron shares suffered last year after its $53 billion deal to buy Hess Corp. stalled due to an arbitration case launched by Exxon, which claims to have a right-of-first refusal over Hess’s 30% stake in Guyana’s Stabroek Block. The case is due to be heard in May with a decision by September.
Hess is critical to Chevron’s strategy because it provides long-term growth well into the 2030s. There’s little chance of a negotiated settlement with Exxon, Wirth said during the interview.