Chevron Doubles Buyback as Spending Cap Helps Lift Cash Flow

(Bloomberg) -- Chevron Corp. doubled its share buyback to as much as $10 billion a year, pledging that shareholders will see the benefits of high oil prices as it locks in spending at historically low levels and reduces costs.

Oil surge to $100 a barrel and record high cash flows have allowed the company to raise the repurchase target, after it lifted the dividend more than expected earlier this year. It's the latest example of the stunning turnaround for the industry after the pandemic had decimated earnings less than two years ago. Shareholders are now seeing the bonanza as majors including Exxon Mobil Corp., Shell Plc and BP Plc have all agreed to boost returns.

Chevron will buy back between $5 billion and $10 billion of stock each year, up from a previous guidance of $3 billion to $5 billion, the San Ramon, California-based company said in a statement. Capital spending will be capped at $17 billion a year through 2026, less than half its peak levels.

As a result, operational cash flow per share, a key metric watched by analysts, will grow 10% every year through 2026 with Brent crude at $60 a barrel, Chevron said. The international oil benchmark rose as much as 5.4% to $103.22 a barrel on Tuesday.

Chevron's plans will mean repurchasing shares at elevated price levels. The stock touched a record high Monday after Russia's invasion of Ukraine sent crude surging. Chief Executive Officer Mike Wirth has said the company will maintain the buyback even if oil prices dip. It's part of his pledge for shareholders to reap the benefits of $100 oil in contrast to previous upturns a decade ago when spending on mega-projects to grow production was the priority.

Chevron is also using its rising cash flow to invest in the energy transition. It announced the $3.1 billion purchase of biofuel maker Renewable Energy Group this week, a deal that will make it one of North America's biggest producers of renewable fuels.

But that's doesn't mean Chevron is moving away from fossil fuels. It expects oil and gas production to grow to more than 3.5 million barrels a day by 2026, about 13% higher than last year, the company said Tuesday. Most of that growth will come from shale production in the Permian Basin and the giant Tengiz development in Kazakhstan.

Chief Executive Officer Mike Wirth is due to present more details on the company's strategy at its investor day starting at 10 a.m. Eastern time.