Investors are bracing for potential cutbacks in share repurchase programs and other capital returns as falling oil prices put pressure on cash flows at major oil companies like ExxonMobil and Chevron.
Ahead of first-quarter earnings reports from the two U.S. oil giants, market participants are focused less on recent profit figures and more on how these companies will adapt to a sharp decline in crude prices. The drop, triggered by geopolitical instability and renewed trade tensions—particularly the tariff announcements by former U.S. President Donald Trump—has raised fears of a recession and softened forecasts for oil demand.
Oil Price Slump Clouds Outlook
Brent crude averaged $74.98 per barrel during Q1 but has since dropped to around $66, with projections now hinting at a prolonged period of depressed prices. The U.S. Energy Information Administration (EIA) recently cut its 2025 average price forecast from $74.22 to $67.87, and now sees 2026 prices averaging just $61.48 per barrel.
This rapid revaluation has serious implications for Big Oil’s generous shareholder return programs.We think the quarterly results will be overshadowed by the forward outlook given the commodity market turmoil,” wrote Scotiabank analyst Paul Cheng.
Buybacks and Dividends at Risk
Share buybacks and dividends have become central to the investment appeal of companies like Exxon and Chevron. But with shrinking margins, maintaining these capital returns is growing more difficult:
Chevron may be forced to scale back its annual $10–20 billion share repurchase program if low prices persist, say analysts from multiple firms.
ExxonMobil, although in a stronger position, is also projected to reduce its buybacks from a $20 billion annual target to about $13.5 billion in 2025.
Chevron is already planning to cut $3 billion in costs and lay off up to 8,000 workers.
Analysts say BP may also need to pare back its share repurchases, which would further strain its struggling stock.
RBC Capital Markets estimates that Chevron needs Brent prices at $95 per barrel to fully cover dividends and buybacks, versus $88 for Exxon. Both firms can, however, maintain dividends with prices in the mid-$50s.
Exxon in a Stronger Position
ExxonMobil appears more resilient due to:
- Larger cash reserves
- Lower break-even production costs
- Stronger cash flow generation
Scotiabank notes that Exxon has a “higher probability than many of their peers” of maintaining current payout levels.
Despite this, analysts widely agree that if Brent remains in the $60s—or worse, slips into the $50s—more companies will face difficult choices.
Capital Spending in the Crosshairs
While immediate cuts to capital expenditures are unlikely, they are not off the table. TD Cowen’s Jason Gabelman predicts that if the price downturn persists, shale investments and green energy projects will be the first to be trimmed. These areas are less critical to core operations and offer greater flexibility for cost adjustments.
Chevron has roughly 55% of its 2025 capex tied to shale and transition energy.
Exxon’s exposure in these areas is slightly lower at less than 50%.
Conclusion
With Q1 profits for Exxon and Chevron expected to rise modestly—analysts forecast $1.73 EPS for Exxon and $2.18 for Chevron—the spotlight now shifts to how these oil majors plan to navigate a potentially prolonged low-price environment. While dividend cuts remain unlikely in the near term, buyback reductions and strategic spending slowdowns are looking increasingly plausible.
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