Chevron (CVX, Financial) has raised its dividend by 5% even though its quarterly profit fell short of expectations due to declining oil prices and refining margins. The company's adjusted earnings per share for the fourth quarter were $2.06, missing market forecasts. Similarly, competitor Shell (SHEL) also reported disappointing profits for the fourth quarter and the full year of 2024.
Despite the underwhelming performance, Chevron's CEO, Mike Wirth, remains optimistic. He believes that the launch of the Tengiz project in Kazakhstan and new capital expenditure limits will improve the company's financial health amid global supply and demand uncertainties. Wirth anticipates an increase in free cash flow by $10 billion by the end of 2026, and Chevron's stock has risen nearly 8% this year, outperforming ExxonMobil's (XOM) 1.9% increase.
The Tengiz project, in which Chevron holds a 50% stake, is expected to produce 1 million barrels per day later this year. In the previous quarter, the average Brent crude price was about $74 per barrel, an 11% drop from the same period last year, pressuring the industry's ability to pay substantial dividends without incurring debt. Chevron's free cash flow for the fourth quarter was $4.4 billion, falling short of the $7.5 billion distributed as dividends and buybacks.
Chevron plans to cut capital expenditures this year, marking the first reduction since the pandemic, contrasting with ExxonMobil's strategy of increasing spending for long-term growth. Additionally, Chevron's $53 billion acquisition of Hess has stalled due to an arbitration case initiated by ExxonMobil, which claims a right of first refusal on Hess's 30% stake in Guyana's Stabroek block. The case is scheduled for a May hearing with a September ruling.
