Why Chevron Stock Surged Over 16% in January
Key Points
Oil prices rallied last month on potential supply concerns.
Chevron posted strong fourth-quarter results last month.
The oil giant also hiked its dividend again and approved a new expansion project.
Shares of Chevron (NYSE: CVX) started this year by rallying 16.1% in January. That easily surpassed the S&P 500's 1.4% rise.
Oil prices helped fuel that rally. However, crude oil wasn't the only catalyst sending Chevron stock higher last month.
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Oil ends its slump
Oil prices rebounded in January. WTI, the U.S. oil price benchmark, rallied 14%, while Brent, the global benchmark, soared 16%. That marked the first monthly gain in crude prices in six months. Rising oil prices provide a lift to oil company profitability. As a result, higher prices fueled a rally in most oil stocks last month.
Supply concerns were the main catalysts fueling oil prices last month. The U.S. captured former Venezuelan President Nicolás Maduro in early January and charged him with narcoterrorism. This event could affect oil flows due to the country's large oil reserves. Additionally, tensions with Iran have grown, which could also impact oil flows.
Chevron could benefit from the changes in Venezuela. The company has operated in the country for over 100 years and could help rebuild its oil infrastructure to increase output.
Capping off a strong year
While oil prices were a big driver of Chevron stock last month, they weren't the only catalyst. The oil giant also reported strong fourth-quarter financial results late last month.
It was a strong year for the oil company. While its earnings declined compared to 2024 due to lower oil prices, Chevron delivered record production volumes, fueled by its acquisition of Hess and recently completed expansion projects. That helped drive higher operating cash flow compared to the prior year and industry-leading free cash flow growth.
That strong cash flow enabled Chevron to return $27.1 billion to shareholders through dividends and repurchases last year. The company also started this year by hiking its dividend by 4%, extending its growth streak to 39 years in a row.
Additionally, Chevron reported meaningful progress on its growth strategy. In addition to completing its acquisition of Hess last year, Chevron also began operations at several expansion projects, made new oil and gas discoveries, and secured exploration blocks in promising areas. The company also advanced its strategy of expanding beyond oil and gas production by starting up its Geismar renewable diesel plant, entering the U.S. lithium sector, and announcing plans to provide power solutions to the U.S. data center sector.
The company continued its growth progress last month by making a Final Investment Decision on the Leviathan gas expansion project offshore Israel. Chevron expects to complete this project toward the end of the decade, enhancing its long-term growth outlook.
A great start to the year
Chevron got a big boost from oil prices last month. The company also reported strong fourth-quarter results and progress toward its continued growth. Chevron's growth prospects, along with its growing dividend, make it an excellent oil stock investment even after last month's rally.
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Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
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