The earnings miss was driven mostly by a surge in so-called corporate costs that include things like stock-based compensation, said Biraj Borkhataria, an RBC Capital Markets analyst. Fourth-quarter corporate costs reached $903 million, 60% above the median forecast.
The quarterly results took the shine off Chevron’s full-year earnings, which more than doubled to $36.5 billon. While the world’s largest oil companies are generating vast amounts of cash and directing more and more of it to investors, questions remain about headwinds in labor and raw material markets.
Chevron Chief Financial Officer Pierre Breber said items such as exploration costs and stock-based compensation can be moving targets that are difficult for analysts to anticipate. The cost of stock-based compensation ballooned because of the rapid run-up in Chevron’s share price last year.
“It’s been a volatile year and sometimes the models have to catch up when we beat and sometimes they don’t quite adjust as earnings were lower in the fourth quarter,” Breber said during an interview.
A lower-than-expected production forecast contributed to investor disappointment, Matt Murphy, an analyst at Tudor, Pickering, Holt & Co. wrote in a note to clients. Analysts also highlighted lower refining and chemical margins as factors.
Chief Executive Officer Mike Wirth and Breber are scheduled to host a conference call with analysts and investors at 11 a.m. New York time.
The blockbuster annual profit is likely to irk oil-industry critics in the White House and Congress already incensed by the second-largest US oil explorer’s announcement just days ago of plans to repurchase $75 billion of its own stock. The amount devoted to buybacks would be enough to buy Occidental Petroleum Corp. or almost any other domestic competitor.
On Thursday, the shares rose the most in almost four months in response to the surprise buyback announcement after the close of equity trading a day earlier. While investors cheered, the Biden administration panned the shareholder-friendly initiative, arguing the cash would be better spent increasing energy supplies to bring down pump prices.
“For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it,” the White House said in a statement within hours of the company’s announcement.
Chevron returned more than $22 billion to investors last year in the form of buybacks and dividends.
Oil companies should “use their record profits to increase supply and reduce costs” for consumers, the White House statement said.
Breber said that’s just what the company is pursuing.
“We’re doing it all,” he said. “We’re investing to grow traditional and new energies.”
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Chevron is the first of the five supermajors to report earnings, with Exxon Mobil Corp. scheduled to post results on Jan. 31, followed by Shell Plc, BP Plc and TotalEnergies SE in the coming weeks.