Chevron profits slip as oil and gas prices fall

Chevron announced record earnings for 2022 but its fourth-quarter profits slipped from previous months in a sign that Big Oil’s cash surge is cooling after fossil fuel prices retreated from near all-time highs in the wake of Russia’s invasion of Ukraine.

The US oil supermajor’s fourth-quarter profit of $6.4bn was down sharply from $11.2bn in the third quarter, well shy of Wall Street expectations of $8.2bn, according to estimates compiled by S&P Capital IQ.

Chevron said lower global oil and gas prices were responsible for most of the decline in earnings, while it also took a $1.1bn writedown in its international production business. The fourth-quarter profit was up about 25 per cent from the same time a year earlier.

Chief executive Mike Wirth touted 2022 as a year in which Chevron “delivered record earnings and cash flow” at the same time that it was “increasing investments and growing US production to a company record”. Its 2022 profit of $35.5bn easily beat the previous annual record of $26.9bn in 2011.

Chevron on Wednesday announced a $75bn share buyback programme, its largest ever and equivalent to roughly a fifth of the company’s current market value. It also increased its quarterly dividend 6 per cent to $1.51 a share. The company said it expected to repurchase about $15bn in shares this year.

The buyback programme defied US president Joe Biden, who has criticised the industry’s big shareholder returns “at a time of war”, arguing companies should instead be spending more to increase supply to help bring down fuel prices at the pump.

“For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75bn to executives and wealthy shareholders sure is an odd way to show it,” Abdullah Hasan, a White House spokesperson, said on Twitter after Chevron announced the programme.

Pierre Breber, Chevron’s chief financial officer, defended the share buybacks in an interview with the Financial Times, pointing to sharply rising spending and output in the Permian Basin, a huge oilfield in Texas and New Mexico, saying the company was “doing it all”.

Chevron said it was planning about $14bn of capital spending this year, roughly 17 per cent higher than last year but still well below pre-coronavirus pandemic levels. It expects its global oil and gas output to be 0-3 per cent higher than last year.

Chevron’s results kick off Big Oil’s earnings season, in which the western oil supermajors — which also include ExxonMobil, Shell, BP and TotalEnergies — are expected to report a record combined profit haul of about $200bn in 2022. Exxon’s earnings are on Tuesday.

But oil prices have fallen from the highs of last summer, in part on worries about a potential economic downturn, and natural gas prices have fallen even further this winter. Brent crude was trading at about $88 a barrel on Friday, down from nearly $130 in June.

Breber said he expected oil prices to remain elevated as China’s economic reopening raises crude demand, global supplies remain under pressure and the US job market remains strong.

“[China’s reopening] is a potential upside that we haven’t seen for almost three years. China kind of limped along for a couple years,” he said.