Chevron Corp.’s decision to repurchase $75 billion of shares and increase dividend payouts instead of investing the money in new drilling is aggravating tensions between President Joe Biden and the oil industry.
The renewed hostility comes as major oil companies prepare to report collective earnings of nearly $200 billion and as gasoline prices continue to rise, aggravating the economic suffering of consumers already suffering from high inflation.
Chevron Profit
According to analyst estimates compiled by Bloomberg, Chevron will report a record-breaking $37 billion profit in 2022, more than doubling its profit from the previous year.
The stock repurchase program will begin on April 1 and will be three times the size of the previous authorization announced at the start of 2019, according to a statement released by the company on Wednesday. The program is equivalent to nearly a quarter of the company’s market value and five times the annual buybacks at present.
Although Chevron’s plan pales in comparison to the $89 billion that Apple Inc. allocated to share repurchases over the past year, it is likely to anger critics who have accused the oil industry of war profiteering since Russia’s invasion of Ukraine caused energy prices to soar.
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White House Criticizes Company’s Announcement
The White House criticized Chevron’s buyback announcement on Wednesday, arguing that the oil company should invest more of its profits in increasing output rather than rewarding shareholders.
At the company’s current rate of expenditures, Chevron’s buyback program could fund more than four years of drilling and other projects.
The new plan to maximize shareholder value followed a rebound in the energy market. The introduction of the coronavirus vaccine is gradually controlling the global spread of the outbreak.
In addition to the easing of Omicron-related concerns, supply shortages and geopolitical tensions in Eastern Europe and the Middle East contributed to the increase in oil prices in the past year. Despite a general market decline, Chevron’s stock price increased by more than 35% last year.
Chevron is ranked third by Zacks (Hold). A is assigned to the stock’s VGM (value-growth-momentum) score. Several ETFs are heavily invested in Chevron and can be leveraged on the company’s dividend increase announcement. It highlights Chevron’s weighting in each fund.
Meanwhile, Exxon Mobil Corp. is anticipated to report a profit of $57.6 billion, and Valero Energy Corp. reported record annual earnings on Thursday, while distributing nearly half of its $13.8 billion in cash generated from operating activities to shareholders.
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