These Energy Stocks Are Beating Exxon and Chevron at Their Own Game. And It's Not Even Close.

Chevron (NYSE: CVX) recently grabbed headlines by unveiling a massive $75 billion share repurchase programExxon Mobil (NYSE: XOM) has also gotten attention for its sizable repurchase program that will see it buy back as much as $35 billion of its stock over the next two years. Those programs are extensions of the oil companies’ long track records of buying back their stock.

However, Marathon Oil (NYSE: MRO) and Marathon Petroleum (NYSE: MPC) are beating the energy giants at the buyback game by a wide margin. Because of that, their buybacks are creating more value for investors.

Drilling down into big oil buybacks

Chevron spent $11.25 billion to repurchase 70 million shares last year. Chevron accelerated its repurchase rate throughout the year, ending 2022 on pace to buy back stock at a $15 billion annual rate. That was by far its biggest buyback over the last two decades:

© Chevron Investor relations presentation
A slide showing Chevron’s repurchases over the last two decades.

Chevron expects to buy back even more shares in the future, evidenced by its new $75 billion repurchase authorization.

Meanwhile, Exxon bought back $14.9 billion of its stock last year. It also expects to buy back even more stock over the next few years, given its $35 billion target for the 2023 to 2024 time frame.

However, despite repurchasing a staggering amount of their stock over the last few years, Exxon and Chevron have barely put a dent in their outstanding shares:

© YCharts
XOM Average Diluted Shares Outstanding (Quarterly)

Chevron’s outstanding shares have risen over the past few years due to the shares issued to buy Noble Energy and Noble Midstream. Exxon has done better as its share count has fallen thanks to the impact of its repurchases.

More impactful repurchases

The buyback programs of refining giant Marathon Petroleum and independent oil and gas producer Marathon Oil — which went their separate ways more than a decade ago — have gotten less attention than the big-dollar buybacks of Exxon and Chevron. However, they have been much more impactful for shareholders. 

Marathon Petroleum bought back $11.9 billion of its stock last year. It has now repurchased a stunning 30% of its outstanding stock since early 2021, when it launched its program:

© Marathon Petroleum investor relations presentation
A slide showing Marathon Petroleum’s shares outstanding.

In addition to using excess cash to fund repurchases, Marathon sold its Speedway gas station business in 2021. It received $16.5 billion in cash, which it used to fund $10 billion of repurchases. 

Meanwhile, Marathon Oil repurchased $3.4 billion of its stock from October 2021 through the end of last year’s third quarter. That has retired a peer-leading 20% of its outstanding shares:

© Marathon Oil investor relations presentation
A chart showing Marathon Oil’s repurchases versus its peers.

Both companies plan to continue buying back their shares. Marathon Petroleum recently approved an incremental $5 billion share repurchase authorization. That increases its currently available capacity to $7.6 billion. Meanwhile, Marathon Oil boosted its authorization by $2.5 billion. 

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One huge benefit of these meaningful buybacks is that they enabled Marathon Petroleum and Marathon Oil to deliver big per-share dividend increases without increasing their total cash outlay. Marathon Petroleum recently increased its dividend by 30%, corresponding to the 30% decline in its outstanding shares. Meanwhile, Marathon Oil most recently increased its dividend by another 13%, fully funded by its share repurchases last year. 

It’s not the size of the buyback that matters

Exxon and Chevron get a lot of attention for the enormous amount of money they spend repurchasing their stock. However, those buybacks are creating little value for investors since they’re hardly putting a dent in their outstanding shares.

On the other hand, Marathon Oil and Marathon Petroleum are completing meaningful repurchases. Those buybacks are creating significant value for their investors, which is evident in the sizable dividend increases they’ve delivered due entirely to the impact of their buyback programs. Because of that, they could deliver higher total returns for their shareholders in the future. 


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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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