Tue. Jan 25th, 2022

© Reuters. FILE PHOTO: A sign of the Chevron gas station in Del Mar, California, is seen on April 25, 2013. REUTERS / Mike Blake / File Photo

By Shariq Khan

(Reuters) -Chevron Corp. reported its highest earnings in six quarters on Friday and joined an oil industry stampede to reward investors with stock rewards as recovery prices brought gains and cash flow at pre-pandemic levels. Oil and gas are trading near multi-year highs, as fuel consumption has caused pandemic losses and increased weather demand. OPEC’s decision to bring production limits next year has kept oil above $ 70 a barrel.

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

Chevron (NYSE 🙂 last year cut spending to allow profits to flow above $ 50 a barrel. Lower costs and higher prices generated the highest cash flow in two years, allowing it to reduce debt and resume stock repurchases, officials said. Stock rewards will resume this quarter at an annual rate of between $ 2,000 and $ 3 billion, CEO Michael Wirth said, about half the annual rate he had planned.

The company and its rivals stopped buying early last year as the pandemic reduced oil demand. Chevron joins Royal Dutch Shell (LON :), TotalEnergies and Equinor to resume repurchases.

“We always said we would start the rewards when we were confident we could keep it and our break-even point is $ 50 a barrel and now we’re well above it,” chief financial officer Pierre Breber told Breuters.

“We are trying to recover investors … the demand for our products has fully recovered, the demand for our stock is recovering.”

The second-largest U.S. oil and gas production unit earned $ 3.188 billion in the quarter compared to a loss of $ 6.09 million years ago.

Total production rose 5% to 3.13 million barrels of oil equivalent per day (boepd), while Chevron sold its oil in the U.S. for $ 54 a barrel last quarter, compared to 19 dollars from the previous year.

Chevron expects production in the Permian Basin to be nearly the same as last year, but said it will add drilling rigs in the second half. Its production rate from the first US shale basin is expected to be 600,000 barrels by the end of 2021.

“It’s still a fundamentally overfed world and that’s why we’re cautious … It won’t lead us to either a production goal or a production goal,” Jay Johnson, Chevron’s senior executive vice president, told analysts.

Meanwhile, the leading US oil producer Exxon Mobil (NYSE 🙂 said it expects more spending on key projects, including Guyana and Permian, in the second half of this year.

Anish Kapadia, energy director at London-based Palissy Advisors, said Chevron’s Permron additions “still seem measured” and that the two U.S. producers appeared to be focused on cash flow over production.

Crude oil prices this year through June rose 57%, while refining and affected chemicals improved with better plant utilization rates and margins.

The United States accounted for most of a $ 839 million profit in Chevron’s refining operations during the quarter, as Asian units suffered weak margins.

Chief Financial Officer Breber said cost reductions have been largely over and he has managed to save targets since his acquisition in 2020 Noble energy (NASDAQ :). Its goal is to raise up to $ 2 billion in asset sales this year. Its adjusted earnings of $ 1.71 per share exceeded Wall Street estimates of $ 1.59, according to Refinitiv IBES data.

Shares of the company fell 0.9%, to $ 101.65 in afternoon trading, after opening further amid a broader drop in energy stocks.

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