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Chevron has the lowest breakeven level in the oil industry.
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It also has a strong balance sheet.
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The company expects to deliver significant free cash flow growth by 2026, and that’s before closing its acquisition of Hess.
Oil prices have slumped this year. Brent, the global oil benchmark, has fallen nearly 15% already this year and was recently in the low $60s. Several factors have weighed on crude oil prices, including OPEC’s decision to increase its production at a time when global demand growth is slowing because of tariffs.
Lower oil prices will affect most oil stocks. However, some companies are in a better position to weather lower oil prices than others. Chevron (NYSE: CVX) is one of those companies. Its resilient portfolio and fortress balance sheet position it to thrive even if oil prices remain low over the next few years.
Chevron has proved the durability of its integrated business model over the decades. It operates oil and gas production, midstream, refining, and chemicals businesses. One evidence of its success is the oil giant’s dividend. CEO Mike Wirth highlighted this factor on the oil company’s recent first-quarter conference call: “We’ve grown our dividend for 38 consecutive years, through multiple commodity cycles, leading our peers in growth over the last decade.”
The company currently has the second longest dividend growth streak in the oil patch behind ExxonMobil. It has delivered faster dividend growth than Exxon and others over the past decade, which is impressive considering all the volatility in the sector during that period. Many other oil companies had to cut their dividends when oil prices slumped.
In addition to paying a growing dividend, Chevron steadily repurchases shares. Wirth noted on the call, “We’ve repurchased shares 18 of the last 22 years, and bought back at record levels in the past two years.” From 2004 through 2022, Chevron repurchased an average of $3 billion of its stock each year. It has significantly ramped up its buybacks in recent years, repurchasing an average of $15 billion annually in 2023 and 2024.
Chevron’s strong balance sheet is a big factor driving its ability to steadily return cash to its shareholders. Over the past decade, Chevron has routinely maintained a leverage ratio at or below its peer-group average. Wirth noted on the call, “Our balance sheet remains strong, with a net debt ratio of 14%, well below our target range of 20% to 25%.
