Chevron Posts Bumper Cash Flow

(Bloomberg) -- Chevron Corp. generated the most free cash flow since the pandemic emerged as economies clawing their way out of more than a year of lockdowns and paralysis burn more fuel.

The oil, natural gas and refining titan posted $3.4 billion in first-quarter cash flow on Friday, more than enough to cover its recently increased dividend, which is a closely watched metric for the oil supermajors. A key driver of the bonanza was a 43% spending cut as Chevron retreats from costly mega-projects to focus on less-risky endeavors such as shale drilling.

The shares dropped 2% in pre-market trading. Despite the cash-flow increase, the company said it’s waiting for market conditions to improve before reinstating share buybacks.

Chevron disclosed adjusted per-share profit of 90 cents, according to a statement, matching the average of analysts’ forecasts compiled by Bloomberg. Chevron followed European peers Royal Dutch Shell Plc and BP Plc in signaling the worst may be over from the dual menace of a worldwide glut and demand-killing Covid-19 lockdowns.

Amid the brightening outlook, significant challenges remain. Chevron’s U.S. refining network lost money for the third time in four quarters, while its overseas fuel-making plants slashed crude-processing by 16% to cope with anemic demand for transportation fuels. The company also cited the negative impacts of the deadly winter storm that afflicted Texas in mid-February.

Chevron flexed its financial might earlier this week by becoming the first Western supermajor to raise dividends above pre-pandemic levels. BP, Shell and Total SE all posted better-than-expected results in recent days, largely on the back of the crude-market rebound.

Combined cash flow of the European giants exceeded $25 billion for the first time since late 2019. BP said it would begin buying back shares while Shell flagged a dividend increase.

In March, Chevron Chief Executive Officer Mike Wirth spoke of his desire to begin buying back shares but declined to provide a time line. Friday’s statement made no mention of share repurchases and Wirth is expected to face questions on the issue from analysts during a conference call later in the morning.

Chevron’s produced the daily equivalent of 3.12 million barrels of oil during quarter, down 4% from a year earlier. Despite the takeover of Noble Energy Inc. last autumn, Chevron’s output slipped as the Texas disaster froze wells and equipment glitches plagued an Australian gas-export facility, among other things.

--With assistance from Laura Hurst.

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