Chevron reported disappointing results for the last quarter of the year. The stock is down. The oil and gas giant earned $4.09 per share while the consensus estimate was $4.33 per share. Chevron suffered from the drop in oil prices in the last quarter, when in previous months the prices were high and expressed phenomenal profitability.
The prices now more or less reflect the prices in the last quarter, so given the current price level, no harm is expected due to a price drop. Regarding the scope of production and production, beyond seasonality, the demands only increase and Chevron is developing additional reserves.
Just before the reports, Chevron said that it would increase its dividend, as well as the extent of its own share buyback. The move angered the White House, which criticized the company’s management for heavily rewarding shareholders as President Biden urges oil companies to drill more to increase supply and force oil prices down.
Is Biden serious? Does he think that if he asks, the companies will give in and run to lower prices and hurt their profits? Chevron is mainly interested in its profit and the reward for the shareholders (and the management). Chevron, which is worth 350 billion dollars, announced that it will buy 75 billion dollars worth of its own shares. At the same time, Mike Wiers, the company’s CEO, said that the company will increase the quarterly dividend by 6% to $1.51 per share. This means for the shareholders – a dividend of approximately 3.4% per year and the purchase of shares amounting to approximately 22% of the outstanding shares, the whole This is equivalent to receiving a return of about 25% on the investment if it ends in a year – low chances. If it ends in two and three years it will bring the total return to 33%, an order of magnitude of 11% per year. Also impressive. The White House is rightfully angry. But It is clear that if you want to do something you have to claim and not ask. Not sure that is possible.
The share buyback program will kick in after the first quarter, as Chevron expects to complete the $25 billion buyback program it announced in 2019. It has no end date. At current prices, $75 billion amounts to 22% of its market value of $346 billion.
Chevron is a huge company that brings in more than 50 billion dollars a quarter, over 200 billion a year and earns at a rate of 32-36 billion dollars. The largest investors in the company are Warren Buffett’s Berkshire Hathaway, which owns 8.55% of the company’s shares, as well as the major asset managers Vanguard and Blackrock with 8.24% and 6.72% respectively.
Chevron is trading at a multiple of around 10 for the current year.
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