Chevron Corporation CVX

Because the earnings, not the price, are unusually low. Chevron made just $1.11 per share in Q1 2026 — its weakest quarter in five years, down about 35% year over year — and roughly $5.77 over the trailing twelve months. Against a $187 price that mechanically prints a ~32x multiple. Integrated oil peers typically trade at 12–21x, so the figure signals a cyclical earnings trough, not a premium valuation. On cash flow Chevron actually screens cheaper than ExxonMobil (~12x vs ~15x price-to-free-cash-flow).

A 30% stake in Guyana's Stabroek block — more than 11 billion barrels of oil equivalent discovered, among the lowest-cost offshore barrels in the world. Chevron closed the ~$53 billion all-stock deal on July 18, 2025 after winning an arbitration against ExxonMobil, issuing roughly 301 million new shares. The acquisition reshaped Chevron from a Permian-and-Tengiz producer into a Permian-plus-Guyana growth story and helped drive production up about 15% year over year to 3.86 million barrels a day in Q1 2026.

The dividend has been raised for 39 consecutive years and now pays $7.12 a share, a ~3.8% yield, and Chevron's cash breakeven is cited below ~$50 Brent — so a routine downcycle pressures the buyback first, not the dividend. The caveat: on depressed earnings the payout ratio sits above 100%, and Q1 2026 GAAP free cash flow was actually negative (-$1.55 billion) on a ~$3B timing effect. Returns currently lean on cash generation staying healthy, which ultimately depends on the oil price.

Net debt climbed to about $40 billion at the end of 2025, roughly double where it stood 18 months earlier, and the company describes itself as in debt-recovery mode. Even as an all-stock deal, Hess added scale and obligations: Chevron issued ~301 million shares and absorbed a larger balance sheet. Leverage is still modest at roughly 1x EBITDA, but the cushion is thinner than before — a key reason the buyback runs at the low end of its $10–20 billion annual range.

Roughly a mid-cycle $65–70 Brent world. Chevron's >10% free-cash-flow growth guidance through 2030 is benchmarked to $70 Brent, and its $10–20 billion buyback framework to $60–80. Spot Brent was about $78 in mid-June 2026, but J.P. Morgan models closer to $60 for the full year. At $187 the price leans toward the optimistic end of that band; a sustained move toward $60 is the main variable the valuation appears to under-weight.