Chevron’s $75 billion takeover may not be all it’s made out to be
The massive share buyback plan unveiled by Chevron on Wednesday may not be very encouraging for investors, according to Bank of America. The oil giant announced a $75 billion buyout plan and a dividend hike, sending shares up as much as 4% on Thursday. However, the updated Chevron share buyback plan did not include any management projections as to the timing or an expiration date. Bank of America analyst Doug Leggate said in a note to clients that despite Chevron’s headline-grabbing multibillion-dollar announcement, buybacks might not even turn out to be a real boost. relative to the pace seen in 2022. Chevron’s latest repurchase is another five years off the current stock repurchase rate. “So far, CVX has indicated no change in pace from its recent execution pace, leaving our assumption that $15 billion per year, which would equate to five years of visibility. But it acknowledges also a balance sheet heading towards zero net debt and speaks to the balancing act that this direction has navigated between capital discipline and sustainable dividend growth,” the note reads. 40% over the past year Chevron was operating under a $25 billion buyout plan, announced in 2019, and was on track to spend most of that past year as of its report on third quarter results Chevron spent $3.75 billion on buybacks in the third quarter, an annual rate of $15 billion But that earlier plan is set to expire at the end of March, just before the law takes effect new authorization we. Because the $75 billion plan is open-ended, it’s also subject to future fluctuations in oil prices, Leggate said. “In our base case, which assumes a long-term Brent of $80, maintaining the current buyback pace at $15 billion perfectly keeps CVX’s annual dividend burden flat, while showing the line of target of the market for a hold per share [dividend] growth at the recent rate of 6% (for 2 consecutive years). What is unclear is whether the pace would change on lower oil prices or whether this would allow debt to rebuild toward management’s 20% threshold,” the note said. As a result, Leggate left its investment view unchanged at neutral, with a $191 per Chevron share price target trading above $184 per share Thursday morning.
[gptChevron’s $75 billion takeover may not be all it’s made out to be