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Chevron Reveals $75+ Billion Capital Distribution Plan

By Howard Smith - Mar 3, 2020 at 1:27PM

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The energy giant has the potential to distribute $75 billion to $80 billion to shareholders over the next five years.

Chevron Corporation (CVX 0.96%) held its annual meeting with analysts earlier today. In discussing its five year business plan, chairman and CEO Michael Wirth focused on growing cash flows and maintaining efficient capital spending. 

He specifically pointed to the ability for the company to distribute between $75 billion and $80 billion to shareholders through stock buybacks and dividends, without relying on any increase in oil prices. 

Deep sea oil rig

Image source: Getty Images.

Improving returns on capital

The company is planning on adding nearly $2 billion in returns, mainly from cost reductions and improving margins. Also, by maintaining capital spending near the same $20 billion to $21 billion level where it's been over the prior two years, the company believes it can double adjusted free cash flow per share by 2024. 

Even at steady levels of $60 per barrel oil prices, it expects return on capital of greater than 10% by 2024, an improvement of more than 300 basis points. The company believes its focus to spend capital on lower-risk projects-including in the Permian Basin, Kazakhstan, and potential deepwater projects in the Gulf of Mexico -  will allow it to return more to shareholders. 

In January 2020, the company announced an 8.4% dividend boost, bringing the current dividend yield to approximately 5.3%. Combined with $5 billion in planned annual share repurchases, total shareholder yield comes to more than 7%. To maintain these returns, Chevron sees compound annual energy production growth of greater than 3% through 2024. Combined with this latest capital return plan, Chevron shareholders have a lot to look forward to going forward.

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