On Monday, Piper Sandler confirmed its Overweight rating on shares of Chevron (NYSE:NYSE:CVX), maintaining a price target of $184.00. Following engagements with Chevron's management, including a dinner with CEO Mike Wirth and meetings with CFO Eimear Bonner, the firm's outlook remains positive. The discussions revolved around Chevron's 2025 capital budget and its strategic shift towards increased cash flow.
Chevron is transitioning from a period of high project spending to one that focuses on cash flow generation. The company's 2025 capital expenditures are projected to decrease by approximately $2 billion year-over-year.
The reduction in spending is expected to contribute to a significant increase in free cash flow (FCF), with projections indicating an underlying FCF growth of $6.0 to $7.0 billion by 2025, assuming a Brent crude oil price of $60 per barrel.
The analyst highlighted Chevron's advantageous five-year growth profile, which is anticipated to accelerate free cash flow generation. The company also promises attractive and sustainable returns to shareholders, with a projected cash return of around 10% in 2025.
The depth and optionality of Chevron's resource base are seen as underappreciated, making the company's stock appealing compared to its industry peers. The firm's reiterated Overweight stance reflects confidence in Chevron's financial strategy and future performance.
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