New
Chevron Sent Investors A Record $27 Billion In Cash Last Year And Could Return Even More In 2025
Last year was one for the record books for Chevron (NYSE: CVX). The energy giant increased its global production by 7% and U.S. output by 19% to record levels. The company also returned a record $27 billion in cash to shareholders through dividends and repurchases.
The oil company is in an excellent position to build on last year's record performance in 2025. Here's a look at what fueled Chevron's record results last year and why this year could be another one for the record books.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
A well-oiled machine
Chevron produced record volumes last year. The oil company benefited from a full year of its acquisition of PDC Energy, which closed in August 2023, as well as from the startup of several key projects in the Gulf of Mexico and the continued development of its position in the Permian Basin, where production jumped 18%.
That growing production enabled Chevron to produce strong free cash flow amid weaker commodity prices. The company's cash flow from operations totaled $31.5 billion, while its free cash flow was $15 billion after accounting for about $16.4 billion in capital expenditures to maintain and grow its global asset base.
Chevron returned all its free cash flow and then some to shareholders last year. Total shareholder returns hit a record $27 billion as Chevron paid $11.8 billion in dividends and repurchased $15.2 billion in shares. Chevron covered the difference with its strong balance sheet. It ended the year with nearly $6.7 billion of cash and a net leverage ratio of 10.4%. That's well below its 20% to 25% target range. The company closed $7.7 billion in asset sales last year, including the $6.5 billion sale of its Canadian assets, to further strengthen its balance sheet.
Set up to deliver another record year
Chevron has a lot of momentum heading into 2025. The company completed several projects in the Gulf of Mexico last year, including its industry-first high-pressure Anchor project in August, which will continue contributing to its production and cash flow growth this year. Meanwhile, it has completed two more major projects already this year. It started production at its Whale facility in the Gulf of Mexico and the future growth project in Kazakhstan last month. Add in the continued growth of its U.S. onshore business, and Chevron's production appears poised to set another record.
The company is also working to cut its expenses by $2 billion to $3 billion by the end of next year. In addition, Chevron expects to reduce capital spending this year to a range of $14.5 billion-$15.5 billion.
These catalysts have the company on track to produce even more free cash flow this year. CEO Michael Wirth sees the company adding $6 billion to $8 billion to its annual free cash flow by 2026 as its growth catalysts and cost-saving initiatives take hold.
On top of all that, the company is still working to close its proposed acquisition of Hess. The company initially expected that the deal, which it signed in October 2023, would be accretive to its cash flow per share this year. It's currently waiting for an arbitration hearing on the deal, which should occur in May. If Chevron wins, it expects to close the acquisition quickly.
Chevron's growing free cash flow positions it to continue returning more money to its investors. The company has already raised its dividend by 5% for 2025, continuing its more than three-decades-long streak of annual dividend increases. Meanwhile, the company aims to repurchase $10 billion to $20 billion of shares each year. Given its growing free cash flow and healthy balance sheet, it could continue to buy back shares in the upper half of that range.
A cash-gushing and returning machine
Chevron delivered record production and cash returns last year, fueled by its high-return investment strategy and strong balance sheet. The company expects to grow its free cash flow this year, putting it in a strong position to return a lot of money to shareholders. This strategy should give the oil stock the fuel to grow shareholder value over the long term. That makes it a compelling investment opportunity, especially for those seeking income, given its 4.4%-yielding dividend.
Should you invest $1,000 in Chevron right now?
Before you buy stock in Chevron, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chevron wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $735,852!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 27, 2025
Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
