Chevron (CVX +0.02%) today reaffirmed its plan to keep a tight lid on investment spending despite soaring oil prices, and it announced new carbon emissions goals to reduce its environmental footprint.
Chevron restated its capital-budget guidance range through 2025, keeping organic capital and exploratory spending between $14 billion and $16 billion per year. Despite surging oil prices, it plans to remain disciplined on investment spending to deliver higher returns to shareholders.
The company estimates that its capital program will double its return on capital employed and grow its free cash flow at a 10% compound annual rate through 2025, assuming Brent crude averages $50 a barrel. It also said that more than $3 billion of that capital would go toward advancing its energy transition to lower carbon sources.
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Chevron also reported that it had exceeded the carbon-intensity reduction targets of its upstream business three years ahead of schedule. Overall, it has reduced its greenhouse gas intensity by 35% from 2016's level, thanks in part to a 65% reduction in gas flaring during that time. And it has pledged to reduce its carbon intensity by an additional 35% by 2028 and eliminate routine gas flaring from its operations by 2030.
CEO Michael Wirth summed up Chevron's plan in four words: "higher returns, lower carbon." In the near term, that strategy should enable it to generate significant free cash to support its dividend and reduce debt, which it hopes will create shareholder value. Meanwhile, the longer-term focus on the energy transition to lower carbon should prevent Chevron from falling too far behind as the global economy accelerates its adoption of cleaner alternatives.
