Chevron exceeds earnings estimates, joins the stampede of share buybacks

July 30 (Reuters) – Chevron Corp (CVX.N) on Friday reported its highest profit in six quarters and joined an oil industry scramble to reward investors with share buybacks, as the rebound in crude oil prices brought profits and cash flow to pre-pandemic levels.

Oil and gas is trading near multi-year highs as fuel consumption has led to pandemic losses and natural gas has skyrocketed due to weather demand. OPEC’s decision to extend production restrictions to next year has kept oil above $ 70 a barrel.

The company has cut its forecast for annual capital spending to about $ 13 billion, now below what it spent last year. He had previously budgeted $ 14 billion to $ 16 billion per year in annual capital spending until 2025.

Last year, Chevron cut spending to allow profits to exceed $ 50 a barrel. Lower costs and higher prices generated the highest cash flow in two years, allowing it to reduce debt and resume share buybacks, officials said.

Share buybacks will resume this quarter at an annual rate of between $ 2 billion and $ 3 billion, said chief executive Michael Wirth, about half the annual rate he had expected.

The company and its rivals halted purchases early last year as the pandemic reduced demand for oil. Chevron is now joining Royal Dutch Shell (RDSa.L), TotalEnergies (TTEF.PA) and Equinor (EQNR.OL) to take over the takeovers.

“We have always said we will start buyouts when we are confident we can keep it going, and our breakeven point is $ 50 a barrel and we are now well above it,” CFO Pierre Breber told Reuters .

“We are trying to win back investors … demand for our products has completely recovered, demand for our stocks is recovering.”

The oil and gas production unit of the second-largest U.S. producer earned $ 3.18 billion in the quarter, down from a loss of $ 6.09 billion a year ago.

Total production rose 5% to 3.13 million barrels of oil equivalent per day (bepd), while Chevron sold its US oil for $ 54 a barrel in the last quarter, down from $ 19 a year earlier.

Chevron expects production from the Permian Basin to be almost the same as last year, but said it will add drilling rigs in the second half of the year. Its production rate from the first American shale basin is expected to be 600,000 bepd by the end of 2021.

“It’s still a fundamentally oversupplied world and that’s why we’re cautious… We’re not going to be guided by a production target or a production target,” Jay Johnson, executive vice president of upstream, told analysts. by Chevron.

Meanwhile, major U.S. oil producer Exxon Mobil (XOM.N) said it expects more spending on key projects, including Guyana and the Permian, in the second half of this year. Read more

Anish Kapadia, energy director at London-based Palissy Advisors, said Chevron’s Permian additions “always seemed measured” and the two US producers appeared to focus on cash flow rather than production.

Crude oil prices this year through June rose 57%, as hard-hit refining and chemicals improved with better plant utilization rates and better margins.

The United States accounted for the bulk of Chevron’s $ 839 million profit from refining operations in the quarter, as Asian units suffered from low margins.

CFO Breber said the cost cuts were largely completed and that he had achieved targeted savings through his 2020 buyout of Noble Energy. It aims to raise up to $ 2 billion through asset sales this year.

Its adjusted earnings of $ 1.71 per share beat Wall Street estimates by $ 1.59, according to IBES data from Refinitiv.

The company’s shares were down 0.9% to $ 101.65 in afternoon trading after an open higher amid a wider decline in energy stocks.

Report by Shariq Khan in Bangalore; Gary McWilliams additional reports; edited by Richard Pullin and Arun Koyyur

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