Chevron shows off war chest by pledging up to $80 billion in returns

 Chevron Corp (CVX.N) on Tuesday said it would keep its spending in check and return up to $ 80 billion to shareholders over the next five years, with Chief Executive Mike Wirth making the case that his company is the oil major best able to produce oil and generate profits at the lowest cost.

The number two U.S. oil producer laid out its plan to weather what is turning into one of the most challenging markets in years, as coronavirus concerns dent short-term demand and environmental and investor pressures cloud the longer-term outlook for the industry.

Chevron will stick to the previously announced capital spending plan of $ 19 billion to $ 22 billion annually through 2024, setting it apart from chief U.S. rival Exxon Mobil, which is spending heavily to boost production.

The spending plan is “a positive and affirming their capital-disciplined philosophy,” said Jennifer Rowland, analyst at Edward Jones.

Oil prices are down 20% this year and natural gas prices have fallen to their lowest since the 1990s. Industry returns have lagged the broader market for a decade, souring investors.

Chevron could distribute as much as $ 80 billion in cash to shareholders over the next five years, Wirth said in a meeting with analysts and investors in New York, adding that the “number one priority is returning cash to shareholders.

While the emergence of coronavirus – which emerged in China late last year and has spread to more than 60 countries – has depressed demand for its products, Wirth said “supply chains are functioning normally.”

He laid out a long term case for growing global demand for oil and gas.

“The world will need more of what we produce, not less,” Wirth said.

But the company has based its plans on a $ 60 international oil price, about $ 7 lower than current prices, and is working toward “increased growth in a world which looks to not need it,” analysts at Tudor, Pickering, Holt & Co. said.

The top U.S. shale field will continue to drive Chevron’s oil growth, and the company expects “sustained production over 1 million barrels per day in the Permian through 2040 at relatively flat activity levels,” said Jay Johnson, executive vice president. Chevron reached 514,000 barrels per day of output in the field at the end of 2019, up 36% in a year.