As Exxon Mobil and Chevron prepare to report Q1 earnings, investors are bracing for potential cuts to shareholder payouts amid a sharp decline in oil prices. The two largest U.S. oil producers have long prioritized dividends and buybacks to attract investors, but falling crude prices—driven by recession fears and new global tariffs—are squeezing cash flows.
Brent crude averaged 74.98/barrel∗∗inQ1buthassinceplummetedto∗∗74.98/barrel∗∗inQ1buthassinceplummetedto∗∗66, with analysts warning of further drops into the 50s∗∗.TheU.S.EnergyInformationAdministration(EIA)slashedits2025priceforecastfrom∗∗50s∗∗.TheU.S.EnergyInformationAdministration(EIA)slashedits2025priceforecastfrom∗∗74.22 to $67.87, exacerbating concerns.
Key Risks:
- Chevron may reduce its 10B–10B–20B annual buyback program if prices stay low, per analysts. It needs 95/barrel∗∗tosustaindividends+buybacks(vs.Exxon’s∗∗95/barrel∗∗tosustaindividends+buybacks(vs.Exxon’s∗∗88).
- Exxon is better positioned with a stronger balance sheet, targeting $20B/year in buybacks through 2026.
- BP and others could also face pressure to trim repurchases.
While near-term capital expenditure cuts are unlikely, shale and green energy projects may face delays. Chevron has already announced $3B in cost cuts and 8,000 layoffs.