Chevron tops profit estimates, joins share buyback stampede

[July 30, 2021]  By Shariq Khan

(Reuters) -Chevron Corp on Friday reported its highest profit in six quarters and joined an oil industry stampede to reward investors with share buybacks, as rebounding crude oil prices carried earnings and cash flow to pre-pandemic levels. Oil and gas are trading near multi-year highs as fuel consumption has thrown off pandemic losses and natural gas has soared on weather demand. OPEC's decision to carry production curbs into next year has kept oil trading above $70 per barrel.

 A Chevron gas station sign is seen in Del Mar, California, April 25, 2013. REUTERS/Mike Blake/File Photo

The company also cut its annual capital spending forecast. At about $13 billion, it is now below what it had spent last year. It had earlier budgeted $14 billion to $16 billion a year in annual capital and exploratory spending through 2025.

Chevron last year slashed spending to allow profits to flow at above $50 a barrel. Lower costs and higher prices generated the highest cash flow in two years, enabling the company to pare debt and resume share repurchases, 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 it had planned.

The company suspended purchases early last year as the pandemic cut oil demand.

"We've always said we would begin buybacks when we were confident that we could sustain it, and our breakeven is $50 per barrel and we are now well above it," Chief Financial Officer Pierre Breber told Reuters.

"We're trying to win back investors...demand for our products has fully recovered, demand for our stock is recovering."

The company's shares rose 2.1% to 104.75 in premarket trade.

Oil and gas production earned $3.18 billion in the quarter ended June 30, compared with a loss of $6.09 billion a year ago.

The second-largest U.S. producer sold its U.S. oil for $54 a barrel last quarter, compared with $19 a year earlier. Total oil and gas production rose 5% over a year ago to 3.13 million barrels per day.

Chevron said it expects output from the Permian basin to be almost same as last year's but will add drilling rigs in the second half. Its production rate from the top U.S. shale basin is expected to be 600,000 barrels of oil equivalent per day by the end of the year.

Its refining operations generated an $839 million profit compared with a loss of $1.01 billion a year ago. U.S. operations accounted for the vast majority of the operating profit as Asia units suffered from weak margins. Chevron joined Royal Dutch Shell, TotalEnergies and Equinor in resuming share buybacks as a means of rewarding investors.

Crude oil prices this year through June were up 57% while hard-hit refining and chemicals improved with plant utilization rates and margins mostly moving higher.

Chevron's cost-cuts are substantially complete now and it has achieved targeted cuts from its 2020 takeover of rival Noble Energy, Breber said. It is aiming to make between $1 billion and $2 billion from asset sales this year.Its adjusted profit of $1.71 per share beat Wall Street estimates of $1.59, according to Refinitiv IBES data.

(Reporting by Shariq Khan in Bengaluru; additional reporting by Gary McWilliams; editing by Richard Pullin and Arun Koyyur)

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