Chevron Corp (CVX.N) on Wednesday said it would triple its budget for share buybacks to $75 billion, the oil industry’s most ambitious shareholder payouts yet, as high gas and oil prices increase profits. The oil industry has been facing calls from the White House and investors to 2022’s record earnings from soaring energy prices into more drilling, acquisitions, or to lower prices for consumers.
Chevron on Friday is expected to post profits for last year doubled to $37.2 billion, based on estimates by Refinitiv. It has budgeted $17 billion on new gas and oil projects for 2023, up $2 billion from 2022.
Chevron’s disclosure of the share buyback and a 6% rise in its quarterly shareholder dividend indicated it will allocate a huge chunk of its profits to reward shareholders. It did not set a timetable for the buybacks.
Chevron and Exxon Mobil (XOM.N) are preparing to report record annual profits for 2022 of about $100 billion combined, analysts forecast. Those unprecedented earnings prompted analysts at Citi on Wednesday to ask if one of the two might acquire Shell (SHEL.L), BP (BP.L), or TotalEnergies (TTEF.PA).
U.S. oil producers overall are raising their budgets for new energy projects in 2023, but the expenditures will be surpassed by the amounts paid to shareholders.
The White House condemned the move in a statement. In 2022, President Joe Biden’s administration requested oil producers to instead invest in production to lower energy prices for consumers and increase investments in renewable energy.
“For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it,” said White House spokesperson Abdullah Hasan.
The U.S. oil majors‘ valuations are roughly 40% above European rivals, Citi said. BP’s market value is nearly $108 billion, in comparison to Exxon’s $466 billion and Chevron’s $346 billion. Exxon Mobil, which outpaced shareholder returns among oil majors in 2022, last month increased its buyback plan to $50 billion through 2024.
Chevron’s buyback plan is smaller compared to those of large technology firms such as Apple. As of September, Apple has authorized $405 billion in buybacks and repurchased more than $90 billion in shares during the prior 12-month period.
Chevron shares jumped almost 3 percent in after-market trade.
In 2022, the energy industry was one of the top sectors in the S&P 500 index after lagging behind the broader market for years.