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Chevron has one of the lowest-risk business models in the oil sector.
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The oil giant has a growth spurt coming in 2026, with even more growth ahead.
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It pays a high-yielding, steadily rising dividend.
Chevron (NYSE: CVX) has delivered a relatively mediocre return over the past year. Shares of the oil giant are up less than 5%, which is underwhelming compared to the nearly 15% gain of the S&P 500 (SNPINDEX: ^GSPC).
Despite that lackluster recent performance, Chevron has a lot going for it these days. Here are three reasons to buy the oil stock like there’s no tomorrow.
Oil companies are inherently riskier due to the volatility of oil and gas prices. However, Chevron has one of the lowest risk profiles in the oil patch. The company has the lowest-cost business in the industry, with a break-even level of around $30 per barrel. That enables Chevron to produce lots of cash flow even at lower oil prices.
Chevron complements its low-cost operations with a fortress balance sheet. Its net debt ratio was 14.8% at the end of the second quarter. That’s toward the lower end of the sector and well below Chevron’s 20%-25% target range. This provides Chevron with the financial flexibility to continue investing in expanding its business during oil market downturns.
Chevron’s capacity to invest throughout the oil market cycle enables it to make long-term investments. It’s starting to reap the rewards of some long-cycle projects. The company achieved first oil at its Future Growth Project in Kazakhstan earlier this year, which is ramping up to full capacity. Chevron also recently completed some new developments in the Gulf of Mexico (also known as the Gulf of America in the U.S.).
These and other initiatives have Chevron’s legacy business on track to produce an incremental $10 billion in annual free cash flow next year. That’s a substantial increase compared to the $15 billion in free cash flow it produced last year.
The company also played the long game with its acquisition of Hess. Chevron initially signed the merger deal in late 2023, but didn’t close the transaction until this July. Its patience will pay off, as that megamerger will provide an immediate boost to Chevron’s free cash flow next year, adding another $2.5 billion to its expected total, which it now sees increasing by $12.5 billion in 2026. Meanwhile, that deal will extend Chevron’s visible production and free cash flow growth outlook into the 2030s.