Profits at Chevron Are Hurt By Lower Oil Prices as the Oil Giant Reduces Stock Buybacks

Shares of Chevron Corp. inched up slightly on Friday after the oil and gas company released its first-quarter earnings report. While the firm posted a drop in quarterly profits and missed revenue expectations, its earnings per share still came in slightly above Wall Street forecasts. Chevron’s overall oil and gas production remained mostly steady, but lower oil prices and a decline in refined product profitability contributed to the earnings decline.

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The Houston-based energy company reported net income of $3.5 billion for the quarter, a 36.4% drop from the same period last year. Chevron cited falling oil prices, reduced profit margins from refining operations, and a $175 million charge tied to higher taxes on oil profits in the United Kingdom as major reasons for the decrease.

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Notably, crude oil futures have plunged by 25.3% over the past year, cutting into the company's upstream earnings, which include exploration and production activities. These fell by 28.3% year over year. Meanwhile, downstream earnings—which include refining, product sales, and distribution—tumbled even more steeply, down 58.5%.

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Despite these challenges, Chevron’s adjusted earnings per share, excluding nonrecurring items, landed at $2.18. While that was a sharp decline from $2.93 in the same quarter last year, it narrowly beat analysts’ consensus estimate of $2.16, according to FactSet. However, total revenue dropped by 2.3% to $47.61 billion, falling short of the expected $48.25 billion. This marked Chevron’s first revenue miss in five quarters and only the second in its last sixteen.

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Chevron’s oil and gas production remained largely flat compared to a year ago. The company said gains in Kazakhstan, the Permian Basin in West Texas, and the Gulf of Mexico were offset by asset sales in other regions. Production increased by 20% in Kazakhstan, 12% in the Permian Basin, and 7% in the Gulf of Mexico.

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CFRA analyst Stewart Glickman noted that despite the decline in profits, Chevron is expected to remain committed to protecting its dividend while continuing to grow its operations in the Permian Basin at a rate of 5% to 6% annually through 2026. Both Chevron and Exxon Mobil Corp. are considered "dividend aristocrats"—a designation for companies that have raised their dividends for at least 25 consecutive years.

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However, Chevron also announced a reduction in its stock buyback program, which is likely to attract investor attention. For the second quarter, the company said it plans to repurchase shares in the range of $2.5 billion to $3 billion, placing it at the lower end of its previously stated range. Citi analyst Alastair Syme remarked that this reduction could be a key concern for shareholders who see energy stocks primarily as vehicles for steady shareholder returns.

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Syme emphasized that while buybacks and dividends matter to investors, the long-term goal should be improving business fundamentals and earning higher returns through smart growth—not just funneling excess income into distributions. “Ultimately, improving shareholder distributions comes from growing a business at a superior rate of return, rather than from overdistributing from income,” he said.

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Chevron reported that it returned $6.9 billion in cash to shareholders during the first quarter. Of that, $3.9 billion came through share repurchases, with the remainder distributed through dividends. The company's ability to continue these shareholder returns may come under scrutiny if oil prices remain under pressure or if global demand softens.

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In terms of stock performance, Chevron shares had declined 5.9% for the year as of Thursday’s close. That puts the stock just behind the Energy Select Sector SPDR ETF, which fell 5.7% over the same period. By comparison, the broader S&P 500 index slipped 4.7% during that time.

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Although the quarter presented a mix of challenges—such as falling oil prices, reduced margins on refined products, and tax burdens overseas—Chevron still managed to outperform earnings expectations and maintain a solid level of cash flow. As the company navigates a complex energy landscape, investors and analysts alike will likely keep a close watch on how it balances its priorities between shareholder returns, capital investments, and long-term growth initiatives.

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