Chevron and other oil stocks have outperformed the wider market so far this year.
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Chevron will ramp up share buybacks as it expects higher returns across the next four years, at a time when major oil companies have seen their stock prices boosted by crude prices at seven-year highs.
Chevron (ticker: CVX) stock surged 1.6% in U.S. premarket trading Tuesday, outpacing declines of 0.6% seen in futures tracking the S&P 500 index.
Chevron said that it expected to continue to improve cost efficiency and deliver higher returns, at its annual investor day Tuesday. That includes as much as doubling its share buyback guidance range each year to $5 billion to $10 billion, up from a prior range of $3 billion to $5 billion.
“With the increase in our dividend and buybacks in the middle of our updated guidance range, cash returned to shareholders is expected to grow more than 50% from last year,” said chief financial officer Pierre Breber.
Share buybacks would come as Chevron stock trades at all-time highs, having climbed more than 40% across the past year relative to a 12% increase in the S&P 500.
The group said that it expected to see a 12% return on capital employed in 2026 as a result of an efficient investment program, lower unit costs, and high production, up from 9.4% as of the end of 2021.
“We’re aiming to grow cash flow and return more of it to shareholders, leveraging our strengths to deliver lower carbon energy to a growing world,” CEO and chair Michael Wirth said in a statement.
Chevron’s prediction for higher returns is based on the price of the international oil benchmark Brent sitting at $60; Brent futures were trading hands above $101 Tuesday, nearly 4% higher on the day.
Oil prices are at their highest levels in seven years, with global supplies tight as demand has come roaring back from the depths of the Covid-19 pandemic. Geopolitical tensions over Russia’s invasion of Ukraine have further boosted crude in recent weeks.
Write to Jack Denton at [email protected]
