Final yr was one for the document books for Chevron (NYSE: CVX). The power large elevated its international manufacturing by 7% and U.S. output by 19% to document ranges. The corporate additionally returned a document $27 billion in money to shareholders via dividends and repurchases.
The oil firm is in a superb place to construct on final yr’s document efficiency in 2025. This is a take a look at what fueled Chevron’s document outcomes final yr and why this yr might be one other one for the document books.
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A well-oiled machine
Chevron produced document volumes final yr. The oil firm benefited from a full yr of its acquisition of PDC Vitality, which closed in August 2023, in addition to from the startup of a number of key tasks within the Gulf of Mexico and the continued improvement of its place within the Permian Basin, the place manufacturing jumped 18%.
That rising manufacturing enabled Chevron to supply sturdy free money movement amid weaker commodity costs. The corporate’s money movement from operations totaled $31.5 billion, whereas its free money movement was $15 billion after accounting for about $16.4 billion in capital expenditures to keep up and develop its international asset base.
Chevron returned all its free money movement after which some to shareholders final yr. Whole shareholder returns hit a document $27 billion as Chevron paid $11.8 billion in dividends and repurchased $15.2 billion in shares. Chevron coated the distinction with its sturdy steadiness sheet. It ended the yr with practically $6.7 billion of money and a web leverage ratio of 10.4%. That is effectively under its 20% to 25% goal vary. The corporate closed $7.7 billion in asset gross sales final yr, together with the $6.5 billion sale of its Canadian belongings, to additional strengthen its steadiness sheet.
Set as much as ship one other document yr
Chevron has lots of momentum heading into 2025. The corporate accomplished a number of tasks within the Gulf of Mexico final yr, together with its industry-first high-pressure Anchor venture in August, which is able to proceed contributing to its manufacturing and money movement development this yr. In the meantime, it has accomplished two extra main tasks already this yr. It began manufacturing at its Whale facility within the Gulf of Mexico and the longer term development venture in Kazakhstan final month. Add within the continued development of its U.S. onshore enterprise, and Chevron’s manufacturing seems poised to set one other document.
The corporate can also be working to chop its bills by $2 billion to $3 billion by the tip of subsequent yr. As well as, Chevron expects to reduce capital spending this year to a range of $14.5 billion-$15.5 billion.
These catalysts have the corporate on observe to supply much more free money movement this yr. CEO Michael Wirth sees the corporate including $6 billion to $8 billion to its annual free cash flow by 2026 as its development catalysts and cost-saving initiatives take maintain.
On prime of all that, the corporate continues to be working to shut its proposed acquisition of Hess. The corporate initially anticipated that the deal, which it signed in October 2023, can be accretive to its money movement per share this yr. It is presently ready for an arbitration listening to on the deal, which ought to happen in Could. If Chevron wins, it expects to shut the acquisition shortly.
Chevron’s rising free money movement positions it to proceed returning extra money to its traders. The corporate has already raised its dividend by 5% for 2025, persevering with its greater than three-decades-long streak of annual dividend will increase. In the meantime, the corporate goals to repurchase $10 billion to $20 billion of shares every year. Given its rising free money movement and wholesome steadiness sheet, it may proceed to purchase again shares within the higher half of that vary.
A cash-gushing and returning machine
Chevron delivered document manufacturing and money returns final yr, fueled by its high-return funding technique and powerful steadiness sheet. The corporate expects to develop its free money movement this yr, placing it in a powerful place to return some huge cash to shareholders. This technique ought to give the oil inventory the gasoline to develop shareholder worth over the long run. That makes it a compelling funding alternative, particularly for these searching for revenue, given its 4.4%-yielding dividend.
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Matt DiLallo has positions in Chevron. The Motley Idiot has positions in and recommends Chevron. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
