Chevron Corporation had its most profitable year since 2014, reporting on Friday, January 28, 2022, that it earned $15.6 billion in net income in 2021, as oil prices surged on the back of a global economic recovery.

This compares with a loss of $5.5 billion in 2020, after the global pandemic routed demand for oil and gas. The US oil and gas giant reported a $5.1 billion ($2.63 per share- diluted) profit for fourth quarter 2021, up from a loss of $655 million ($0.33 per share-diluted) in the fourth quarter of 2020.

Chevron also said it generated $2.1 billion in free cash flow in 2021, its highest ever. These results reflected assets sale gains of $520 million, losses on the early retirement of debt of $260 million and pension settlement costs of $82 million.

According to a press release, the company said foreign currency effects decreased earnings by $40 million, adjusted earnings were $4.9 billion ($2.56 per share- diluted) in fourth quarter of 2021 compared with adjusted earnings of $298 million ($0.16 per share- diluted) in fourth quarter of 2020.

Chevron’s stock price reached record-highs on Thursday, January 27, 2021 closing at more than $135 per share, as investors reacted to Chevron’s announcement that it would raise its quarterly dividend by 6%. But the company’s shares fell more than 4% in pre-market trading Friday morning following the release of its fourth quarter earnings, which were lower than analysts had expected.

“We’re delivering greater value to stockholders today, while working to meet the world’s growing energy demands in a lower carbon future,” Mike Wirth, Chevron’s chief executive, said.

The company said its first-quarter share buybacks would be at the higher end of $3 billion to $5 billion annual range it estimated last year. Chevron raised its dividend by 6% to $1.42 per share this week.

“I expect 2022 will be even better for cash returned to shareholders. We’re more capital and cost efficient, enabling us to return more cash to shareholders.”
Mike Wirth, CEO, Chevron

Chevron sticks to Moderate Budget

Meanwhile, the surge in oil prices have left investors wondering whether oil and gas companies will follow their historical impulse to increase drilling in pursuit of higher profits. Chevron is the first of the largest Western oil companies to report earnings.

Chevron has said it is sticking to a relatively modest budget and will return increasing amounts of cash to shareholders. Chevron’s dividend increase Thursday marked the 35th consecutive year the company has raised the payout. Chevron has also said it would buy back as much as $5 billion of its stock after buying back $1.4 billion in 2021.

“We’re going to maintain capital discipline,” said Chevron Chief Financial Officer Pierre Breber. “We’re going to build back activity as the market recovers.”

Chevron said in December 2021, it would increase capital expenditures in 2022 to $15 billion, a 20% increase from the previous year but still well below pre-pandemic levels.

Mr. Breber stated that the company will maintain that budget. Chevron has said it would spend between $15 billion and $17 billion through 2025 compared with previous plans to spend $19 billion to $22 billion a year before the pandemic.

Despite the lower spending levels, Chevron said it set a record for oil and gas production in 2021, producing 3.1 million barrels a day, a modest increase from last year’s levels. For the company, it can grow production despite its more disciplined spending because of structural cost savings implemented during the pandemic.