Chevron’s $15.6B profit is its best in 7 years

Chevron had its best year since 2014, raking in $15.6 billion last year as oil demand and prices recovered from the pandemic and historic oil crash.

The California oil major on Friday reported a remarkable turnaround with 2021 profit and revenue surpassing pre-pandemic levels. The company’s 2021 profit compares with a loss of $5.5 billion in 2020 and a profit of $2.9 billion in 2019. Annual revenue last year soared to $162 billion, compared with $94.7 billion in 2020 and $146.5 billion in 2019.

“By the end of 2021, we had one of our most successful years ever with return on capital employed approaching 10 percent, our highest since 2014,” CEO Mike Wirth said. “Chevron is an even better company than we were just a few years ago.”

Chevron’s blockbuster earnings demonstrate that Big Oil has recovered from the worst oil bust in a generation caused by the global pandemic, which forced the world’s largest oil companies to slash production, capital spending and lay off thousands of employees.

The rollout of coronavirus vaccines last year have lifted restrictions on business and travel, raising demand for crude and petroleum products such as gasoline and jet fuel. West Texas Intermediate, the U.S. crude benchmark, settled Friday in New York at $86.82, up from around $48 a barrel last year.

Chevron has reported four consecutive profitable quarters, reporting earnings of $5.1 billion in the three months ended Dec. 31 compared with a loss of $665 million during the same period a year earlier. Fourth-quarter revenue jumped by nearly 91 percent to $48.1 billion from $25.2 billion a year earlier.

Chevron's oil and natural gas production volumes exceeded market expectations by about 1 percent during the fourth quarter. However, the company's international upstream earnings of $2.2 billion was lower by almost one-third from the previous quarter, falling short of Wall Street expectations.

“This shortfall drove a substantial earnings miss,” said Peter McNally, an energy leader at New York market research firm Third Bridge.

Chevron’s stock fell 3.5 percent on Friday to $130.61.

Wirth said Chevron will remain disciplined even as crude prices have rallied to near $90 a barrel. Publicly traded oil majors, such as Chevron and its Texas rival Exxon, have pledged to keep spending at near historic lows on new projects in an effort to attract Wall Street investment back to the sector after years of poor returns.

Chevron last month said it plans to increase spending on new drilling projects by 20 percent to $15 billion this year, which is still lower than pre-pandemic levels of $19 billion to $22 billion.

The company plans to increase its capital spending in the Permian Basin of West Texas and New Mexico to $3 billion this year from $2 billion last year. Wirth said he expects the number of Chevron wells put into production in the nation’s most productive oil field will increase by 50 percent this year.

“I think the overarching message that investors should take away is we’re going to stay disciplined on capital,” Wirth said. “We’re not chasing price. We’re improving returns, and you can count on us to continue to do that and we should generate very strong free cash flow in this environment.”

Instead of using its increased profits and revenue to drill more wells when high crude prices typically call for increased production, oil giants are focused on returning more cash to shareholders through dividends and stock buybacks.

Chevron on Wednesday raised its quarterly dividend by 8 cents to $1.42 per share, putting the company on track to make 2022 its 35th year of annual dividend increases. The company expects to buy back close to $5 billion of stocks from its shareholders this year.

“I expect 2022 will be even better for cash returns to shareholders,” Wirth said. “We're optimistic about the future, focused on continuing to reward our shareholders while investing to grow our businesses and maintaining a strong balance sheet.” paul.takahashi@chron.com twitter.com/paultakahashi