Chevron Falls After Announcement of Huge $75 Billion Buyback

Earning, excluding one-time items, was $4.09 a share, according to a statement released Friday, 18 cents less than Bloomberg’s consensus estimate. Chevron also incurred a $1.1 billion writedown on its foreign business.

The profit squeeze was mainly due to an increase in so-called corporate costs that include things like stock-based compensation, said Biraj Borjataria, an analyst at RBC Capital Markets. Fourth quarter corporate costs reached $903 million, 60% above median forecast.

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The quarterly results dulled Chevron’s full-year profit, which more than doubled to $36.5 billion. While the world’s biggest oil companies are generating vast amounts of cash and directing more and more of it to investors, questions remain about headwinds in the labor and commodity markets.

Chevron’s chief financial officer, Pierre Breber, said things like exploration costs and stock-based compensation can be hard moving targets for analysts to anticipate. The cost of stock-based compensation skyrocketed due to Chevron’s soaring stock price last year.

A lower-than-expected production forecast contributed to investor disappointment, Matt Murphy, an analyst at Tudor, Pickering, Holt & Co., wrote in a note to clients. Analysts also highlighted lower refining and chemical margins as factors.

The huge annual profits are likely to provoke irritation among critics of the oil industry in the White House and Congress who are already outraged by the announcement by the second-biggest US oil explorer just days ago about plans to buy back $75,000. millions of its own shares. The amount earmarked for the buybacks would be enough to buy Occidental Petroleum Corp. or almost any other national competitor.

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On Thursday, shares posted their biggest gain in nearly four months in response to the surprising buyback announcement after the close of trading the previous day. Although investors greeted the news with glee, the Biden administration criticized the initiative, arguing that the money would be better spent increasing energy supplies to lower prices.

“For a company that claimed not long ago that it was ‘working hard’ to increase oil production, doling out $75 billion among wealthy executives and shareholders is a strange way to show it.” the White House said in a statement just hours after the company’s announcement.

Chevron returned more than $22 billion to its investors last year in the form of buybacks and dividends.

oil companies should “use their record profits to increase supply and reduce costs” for consumers, according to the White House statement.

Breber said that is precisely what the company is after.

“We are doing everything. We are investing in traditional and new energies”.

Chevron is the first of the five major oil companies to present results. Exxon Mobil Corp. is scheduled to do so on January 31, followed by Shell Plc, BP Plc and TotalEnergies SE in the coming weeks.