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Financial Times: Chevron moves to spend $15bn on its own shares

By Ed Crooks in London
Published: September 27 2007 03:00 | Last updated: September 27 2007 03:00

Chevron, the second-largest US oil company, is to spend $15bn on its own shares within the next three years, extending a $5bn-a-year programme that began in 2005.

The move reflects big oil companies’ difficulties in finding uses for their large cash flows, boosted by high oil prices.

Some of Chevron’s rivals among the “big five” international oil companies have been returning even larger sums to shareholders.

The rise of resource nationalism among oil and gas-rich countries, and growing competition from ambitious national oil companies from emerging economies, has made it harder for the international oil companies to find investment projects with attractive commercial terms.

Dave O’Reilly, Chevron’s chairman and chief executive, said: “Our continuing strong cash flows have enabled us to fund a significant capital programme budgeted at almost $20bn in 2007, increase dividends to our stockholders, repurchase our shares in the market and reduce the company’s debt.”

Chevron’s buy-backs are dwarfed by ExxonMobil’s and BP’s. Exxon’s gross share purchases were worth $16bn in the first half of 2007, reducing the shares outstanding by 3.2 per cent. It spent $29.6bn in 2006.

BP, which has a market capitalisation roughly in line with Chevron at about $220bn, is the next heaviest spender. It bought back $15.5bn-worth of shares last year. European rival Royal Dutch Shell was more modest, buying back $8.2bn worth of shares. There have been signs that Shell and BP have been reducing their repurchasing this year. BP’s buy-backs for the year to date have been worth about $5.9bn, and Shell’s were just $1.4bn in the first half.

Shell has questioned the value of buy-backs and some analysts and investors agree there appears to be little correlation between the scale of buy-backs and share price performance.

See Commodities

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