Chevron Shares 2022 Capital Expenditures; FVE Unchanged

Chevron (CVX) announced a capital spending program of $15 billion for 2022, 20% higher than 2021, but at the low end of its previous guidance of $15 billion to $17 billion. Spending is primarily directed to the upstream segment with $12.6 billion, including $3 billion in Permian spending, and also $800 million in lower-carbon spending. Our fair value estimate and narrow moat rating are unchanged.

Management also increased its annual share repurchase guidance to $3 billion-5 billion from $2 billion-3 billion previously. The new annual amount equates to about 1.4%-2.3% of the current market cap and comes on top of a 4.8% dividend yield.

While not the cheapest integrated oil company in our coverage at a 12% discount to our fair value estimate, Chevron continues to present one of the safer options given the strong balance sheet, track record of capital discipline, focus on shareholder returns and oil-leveraged portfolio. Its low-carbon strategy is also more circumspect and focuses on areas where it already has competency or in markets where it already participates.