Chevron trims spending plan as focus shifts to cash generation

Investing.com -- Chevron said it will scale back planned spending next year as the company shifts its priority toward profitability rather than expanding output, with crude trading near its weakest levels since 2021.

The energy major expects capital expenditures of about $18.5 billion in 2026, placing the figure at the lower end of the guidance issued last month and below the $19 billion to $22 billion range projected after its July acquisition of Hess.

About one-third of the total budget is slated for U.S. shale operations across Texas, New Mexico, Colorado and North Dakota.

Upstream will account for the bulk of investment at $16.7 billion to $17.3 billion. That includes $8.9 billion to $9.2 billion for U.S. upstream — roughly $6 billion of which is allocated to shale and tight assets such as the Permian, DJ and Bakken — and $7.8 billion to $8.1 billion for international upstream. The latter figure includes about $0.4 billion in capitalized interest tied mainly to Guyana.

Chevron also expects exploration spending to rise roughly 50% from recent levels, increasing from about $1 billion annually to $1.5 billion.

Downstream capital expenditure is projected at $0.9 billion to $1.1 billion, split between $0.7 billion to $0.8 billion in the U.S. and $0.2 billion to $0.3 billion internationally. Around $1 billion of the company’s divisional budgets is earmarked for low-carbon initiatives, compared with $1.5 billion in the 2025 program.

Affiliate spending is estimated at $1.3 billion to $1.7 billion, divided between $0.5 billion to $0.7 billion in upstream and $0.8 billion to $1.0 billion in downstream. Chevron said CPChem will represent about half of this spend while Tengiz (TCO) will account for roughly a quarter, with the lower TCO capex outlook helping support distributions.

Chief Executive Mike Wirth has previously signaled that several multi-year growth projects are now complete, giving the company flexibility to sustain dividends and buybacks even in a softer price backdrop. By tightening spending on new developments, Chevron expects free cash flow to rise 14% annually and surpass $30 billion by 2030.

RBC Capital Markets analysts led by Biraj Borkhataria said the updated plan “looks broadly in line with market expectations, with a step down in capital intensity across CVX’s Permian and TCO assets, helping support FCF generation into 2026.”

Most of Chevron’s growth-oriented spending will be focused on the U.S. Gulf, the Eastern Mediterranean and Guyana, where the Hess deal added a 30% stake in what is considered the largest oil discovery of the past decade.

“Our 2026 capital program focuses on the highest-return opportunities while maintaining discipline and improving efficiency, enabling us to grow cash flow,” Wirth said.

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