© Reuters. A Chevron gas station sign is seen in Austin, Texas, U.S., October 23, 2023. REUTERS/Brian Snyder
By Sabrina Valle
HOUSTON (Reuters) – Chevron Corp (NYSE:) on Friday reported a sharply lower, $21.3 billion profit for 2023 as earnings from oil production and refining fuels tumbled during a year of missteps and charges.
The No. 2 U.S. oil producer has suffered from delayed expansion programs and higher costs in its oil and gas production business. In refining, U.S. margins fell sharply even as rivals reported better-than-expected results.
Despite the nearly 40% fall in annual profit, Chevron announced it would increase its dividend by 8% in a sign of confidence. It returned a record $26.3 billion last year to shareholders via dividends and buybacks.
“We returned more cash to shareholders and produced more oil and than any year in the company’s history,” Chevron CEO Mike Wirth said.
Oil and gas production rose on shale gains and acquisitions. In the Permian basin, the top U.S. shale field, volumes rose 10%, helping lift output for the year to 3.12 million barrels of oil and gas per day.
But lower prices, foreign currency hits and one-time charges offset the volume gains. Fourth-quarter earnings fell 18% from a year earlier to $6.45 billion, or $3.45 per share, excluding $3.7 billion in charges to impair existing assets in California and to cover decommissioning costs in the U.S. Gulf of Mexico.
Higher environmental costs and regulations also are being felt across the oil industry. Chevron’s big fourth-quarter writedowns mirrored those at Exxon Mobil (NYSE:) and Shell (LON:). Governments have imposed new methane emissions restrictions and higher taxes on energy companies after blockbuster earnings.
Chevron’s cash flow from operations was lower than a year earlier mainly due to lower commodity prices and lower margins on refined product sales. Its return on capital employed, a measure of how efficiently it invests, fell to 5.1% in the fourth quarter from 14.2% in the year-ago quarter.
Production delays and maintenance requirements at a major Kazakhstan oil expansion project and higher costs elsewhere prompted the company to admit in December it was underperforming its potential. Kazakhstan output will fall by 50,000 barrels per day this year on maintenance.
Chevron has acquired oil production and reserves. It has offered to buy Hess Corp (NYSE:) for $53 billion to get a foothold in Guyana’s lucrative offshore fields, and last year completed a deal for PDC Energy (NASDAQ:) that boosted its U.S. production.
Adjusted full-year earnings were $24.69 billion, or $13.13 per share, down from $36.54 billion, or $18.83 per share, in the prior year.
The acquisitions and higher investments in the U.S. pushed full-year capital spending up 32% to $15.8 billion. That includes about $450 million it poured into PDC assets, which added 266,000 barrels per day (bpd) of oil and gas production during the quarter.
