Chevron CEO under pressure to halt share slide as Hess deal stalls
Chevron earnings fail to cover dividends, buybacks
Delayed Hess deal a drag on the company's share price
Guyana volumes crucial for long-term oil output gains
By Sabrina Valle, Ron Bousso and Marianna Parraga
HOUSTON, Oct 31 (Reuters) -Five years ago, Chevron CEO Michael Wirth won Wall Street acclaim as the No. 2 U.S. oil company briefly achieved a market value larger than Exxon Mobil's after he refused to get into a bidding war with Occidental Petroleum over a rival.
He was ahead of the game when the pandemic hit oil and gas demand, forcing rivals to make deep cutbacks that Wirth had already tackled at Chevron. Its shares had outperformed rivals for five years until 2022.
Fast forward to 2024 and Wirth's legacy is in danger. Chevron’s falling earnings no longer cover its dividends and buybacks. Project overruns in Kazakhstan and Australia have cost the company billions.
The CEO is also locked in a must-win arbitration battle with Exxon Mobil XOM.N that has held up his $53 billion purchase of Hess HES.N, a deal that would give Chevron a stake in a lucrative Guyana oilfield that Exxon operates.
Exxon's challenge has delayed the deal by almost two years, and threatens to kill it entirely by asserting a right of first refusal over a sale of the Guyana properties.
Chevron shares are up 18% since Wirth took over as CEO in 2018, compared to Exxon's 31% gain over the same period.
Wirth's job is not at risk, say Chevron executives and industry sources. The board granted him a retirement-age waiver more than a year ago as he began a sweeping overhaul of top managers.
But "If you have $1 to invest in an oil company now, how would you justify investing it in Chevron?," said Mark Kelly, an analyst with the financial firm MKP Advisors in London. "The Hess deal delay has left Chevron with no clear (business) growth story to tell."
Jake Spiering, Chevron's head of investor relations, said the company's share performance this year has been hurt by the arbitration case that has encouraged arbitrage traders to short Chevron.
"The Chevron story is coming. This growth, and earnings, and cash inflection is coming," Spiering said. Chevron is poised to deliver the highest production growth rate in the industry over the next 12 months by expanding existing projects, he said.
The board is pressing for a faster turnaround of earnings, according to people familiar with the board's thinking who requested anonymity as board discussions are private. Profits have declined for the past five quarters on a year-over-year basis as oil prices retreated from 2022 highs.
NEW TEAM
Wirth has ushered in a new team with the resignations or retirements of his former finance chief, head of oil products and gas, human resources chief and midstream and trading bosses in a bid to shake things up.
"There is a lot of pressure on Mike because of Hess," said one of the people close to the company's board. "It's a make or break for Mike," the person said.
Wirth has shown a knack for multi-billion-dollar acquisitions, picking up Noble Energy and PDC Energy in deals near the market bottom or that closed quickly.
"We aspire to be high performance, and you should expect the board to expect that," Spiering said earlier this month in response to questions about the company's performance.
Wirth was not available to comment and Chevron declined to make board members available for comment.
BIGGEST SHADOW
The biggest shadow over the company remains its dispute with Hess partners' Exxon and CNOOC Ltd 0883.HK over their Guyana offshore holdings, which contain the world's largest oil discovery in almost two decades. The deal originally was to close in the first half of this year, but a decision in the arbitration case may not be issued until the third quarter of next year.
The delay is crucial to Chevron because the deal closing would give the company a 30% stake in Guyana's surging oil output, which last year delivered Hess a $1.88 billion net profit.
The stake would provide Chevron with long-lived oil production from a country with fewer geopolitical risks than its Venezuela or Kazakhstan operations, the latter of which accounts for nearly 20% of Chevron's easily tapped oil reserves.
The Kazakh Tengizchevroil oil project, in which Exxon holds a 25% stake, is nearly three years behind an initial mid-2022 startup and has exceeded its original $37 billion budget by over $10 billion.
"If the (operational) issues continue or if the deal were to eventually fall apart, we could see further underperformance," said Biraj Borkhataria, an analyst at RBC Capital.
VENEZUELA LICENSE?
Guyana, located on South America's Atlantic coast, could help improve the quality of the company's portfolio in Latin America, where it keeps a limited presence in Brazil, Argentina and smaller countries. The region excluding Venezuela has provided less than 2% of its global output for the past decade.
U.S. lawmakers and Venezuelan opposition leaders and activists have called for tighter restrictions on the company's dealings in Venezuela.
Tax and royalties paid to the repressive Nicolas Maduro administration have propped up the government, they say. The July presidential election claimed by Maduro has been condemned as fraudulent by the U.S. and regional Organization of American States.
If Chevron's license to operate in Venezuela were terminated or amended, which analysts say could happen if former President Donald Trump returns to office and restores his campaign against Maduro,the company could lose its right to export about 220,000 barrels per day of oil.
Chevron continues to make the case to U.S. authorities that it has been a force for good in Venezuela and has received continued six-month authorizations to remain there.
The No. 2 U.S. oil company is expected to post third quarter earnings on Friday of $4.26 billion, according to estimates compiled by financial firm LSEG, down 35% from the $6.53 billion a year ago on weaker oil prices and refining margins.
“Mike Wirth is in a pickle,” said Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group, a market maker for Chevron and Hess stocks.
"If you spend two years working on a deal, assuring investors you are right, only to be proven wrong, should you still be trusted with investors’ money?"
Reporting by Sabrina Valle and Marianna Parraga in Houston, and Ron Bousso in London; Editing by Gary McWilliams and Anna Driver
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔