Chevron Cuts Buyback as Trump Trade War, OPEC Hit Oil Prices

(Bloomberg) -- Chevron Corp. will reduce share buybacks this quarter after oil prices tumbled, indicating that President Donald Trump’s trade war is hurting a key US industry he pledged to help. 

Chevron will repurchase about $2.75 billion of stock in the second quarter, about 30% less than it bought in the first three months of the year, the Houston-based company said Friday. The move comes despite Chevron beating earnings estimates on more low-cost production from Kazakhstan and the Permian Basin. 

“Oil prices have changed,” Chief Financial Officer Eimear Bonner said in an interview. “The market, from a supply and demand perspective, appears to be softening.”

Big Oil is finding it increasingly difficult to maintain share buybacks as Brent crude slumped 17% this year to about $62 a barrel at the close Thursday. Trump’s tariffs are poised to slow demand growth for crude and increase the cost of steel and other materials needed to produce oil and gas. At the same time, OPEC and its allies surprised markets last month with a plan to increase oil supplies more than expected later this year. 

Also See: Shell Shows Its Strength by Sticking to Plans Amid Oil Downturn

Chevron shares dropped 2% before the start of regular trading in New York. US crude futures fell 0.5%, to $58.93 a barrel. 

Chevron’s second-quarter buyback of between $2.5 billion and $3 billion, if maintained for the rest of the year, still fits within its annual guidance of $10 billion to $20 billion, but would be a reduction from last year’s payout. The company spent an additional sum buying 5% of Hess Corp. shares in the first quarter, a stake worth around $2.3 billion at the time, ahead of the anticipated merger later this year. 

BP cut its share buyback by more than half earlier this week. TotalEnergies SE maintained its payout but was forced to fund it with extra borrowing. 

“This is still a very strong program” of repurchases, Bonner said. “A rate that’s higher than our highest year before Covid.” 

Chevron’s adjusted first-quarter earnings of $2.18 a share exceeded the analysts’ consensus of $2.10 a share, according to estimates compiled by Bloomberg. Capital expenditure was lower than a year ago as the company cut spending in its refineries. 

Chevron’s debt level, meanwhile, remains healthy. Its net debt radio jumped to 14.4% at the end of the first quarter from 10.4% in the prior period, even before the drop in oil prices last month. But that’s well below the company’s target range of 20% to 25%. 

Global oil producers are all under strain from low crude prices but are dealing with the downturn in different ways. BP and Eni SpA have reduced their 2025 capital expenditure, while TotalEnergies quadrupled its net debt in an effort to stick to its growth plans, which it believes will pay off when commodity prices increase. 

Shell, which also announced first-quarter results Friday, said it is holding firm on its plans for investor returns and capital spending.

“We’re just working through our plan and we don’t really change anything,” Shell Chief Financial Officer Sinead Gorman said on a conference call. “But I do understand for other companies that can be more difficult when they haven’t positioned quite as well.”

Chevron’s overall first-quarter crude production was flat from a year ago at about 3.35 million barrels of oil equivalent a day. 

The company did, however, increase output in some key locations. Chevron grew production at its Tengiz project in Kazakhstan by 20%, in the Permian Basin by 12% and in the Gulf of Mexico by 7% from a year ago, providing highly-profitable barrels that offset lost output from asset sales. 

Chevron has no plans to change its production or capital expenditure targets this year. It expects to grow free cash flow by $9 billion with oil at $60 a barrel, Bonner said. 

Aside from low oil prices, Chief Executive Officer Mike Wirth also faces significant risks around the globe. 

Chevron’s push to buy Hess Corp. for $53 billion and gain a foothold in Guyana — home to the largest oil discovery of the past decade — faces a key hurdle this month when an arbitration panel holds a hearing on whether the deal can proceed. Arch-rival Exxon Mobil Corp., which operates Guyana’s massive oil field, filed the arbitration case to block Chevron’s acquisition, saying it has a right of first refusal over Hess’s stake. 

Meanwhile, Saudi Arabia is attempting to enforce OPEC quotas in Kazakhstan, where Chevron’s giant Tengiz project recently started up. In Israel, the company’s plans to expand gas production have been slowed due to conflict. And in Venezuela, the Trump administration recently reimposed sanctions, where Chevron is the last remaining US producer. 

Further, the company needs oil prices of $95 a barrel or higher this year to break even after paying its capital expenditure, dividends and buybacks, the highest among its peers, according to RBC Capital Markets. 

Wirth is driving down costs in an attempt to mitigate the financial impact of some of these risks and bolster Chevron’s finances for the downturn. He announced plans to lay off as much as 20% of the workforce earlier this year and reduced low-carbon spending by 25%. 

(Adds shares in the fifth paragraph and details about Hess in the sixth paragraph.)

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