Key Points
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Chevron and TotalEnergies are two of the world’s largest energy companies.
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While both have diversified operations, TotalEnergies is investing heavily to expand its power production capacity.
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TotalEnergies’ power strategy could fuel faster free cash flow growth over the next five years.
- 10 stocks we like better than Chevron ›
Chevron (NYSE: CVX) and TotalEnergies (NYSE: TTE) are two of the largest international oil companies. They have integrated and diversified operations and top-tier balance sheets. These characteristics put them in strong positions to weather the ups and downs of the global energy industry.
Here’s a look at which of these two top energy stocks is the better buy.
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Drilling down into these top oil stocks
U.S.-based Chevron has a globally diversified upstream portfolio that boasts one of the industry’s lowest breakeven levels (less than $50 a barrel to fund its capital program and dividend). The oil company complements its upstream business with integrated refining and marketing operations, a chemicals business, and a growing portfolio of new energy solutions (it’s the U.S. leader in renewable fuels and is building power solutions for AI). Chevron also has an elite balance sheet (Aa2/AA- credit rating).
Chevron’s U.S. upstream business is its largest segment ($2.1 billion of earnings and over 2 million barrels of oil equivalent per day (BOE/D) of production in the first quarter). However, its international upstream business isn’t too far behind ($1.8 billion in earnings and 1.8 million BOE/d of production in the first quarter). Meanwhile, the company has fairly balanced downstream operations, with 1.3 million barrels per day of U.S. refined product sales last quarter and 1.5 million barrels per day from its international operations.
France’s TotalEnergies is a global integrated energy company. Its operations span oil and biofuels, natural gas, biogas and low-carbon hydrogen, renewables, and electricity. While TotalEnergies has some U.S. operations, it’s much more geographically diversified. It also has much more diversified business operations. During the first quarter, the company generated $2.5 billion of adjusted earnings from its exploration and production business, $1.6 billion from its refining and chemicals business, $1.3 billion from its integrated LNG business, $545 million from its integrated power business, and $262 million from its marketing and services business. The company also has a strong, investment-grade balance sheet (A+/Aa3 credit ratings).
Their plans to 2030 and beyond
Chevron plans to continue investing heavily to expand its legacy oil and gas business over the next five years. It aims to invest $18 billion to $21 billion each year ($18 billion to $19 billion in 2026). It plans to invest most of that money in its upstream business, with more than half of its overall capital spending in 2026 earmarked toward its U.S. operations. The company is also investing about $1 billion per year to reduce the carbon intensity of its operations and expand its new energy businesses.
The U.S. oil giant’s investment strategy positions it to grow free cash flow by more than 10% annually through 2030, assuming oil averages $70 a barrel. That will allow it to continue increasing its dividend (a current yield of 3.8% and 39 years of consecutive increases), while repurchasing $10 billion to $20 billion of its shares each year.
TotalEnergies is spreading its capital across its more diversified operations. The company plans to invest about $15 billion this year, with 40% allocated to new oil and gas projects, 20% toward integrated power and low-carbon molecules, and the rest to maintain its legacy oil and gas operations. The company’s strategy should grow its oil and gas production at a 3% compound annual rate through 2030, while more than doubling its power generation capacity (41 TWh in 2024 to 100-200 TWh by 2030). These investments position it to deliver about 20% annual free cash flow per share growth through 2030. That should enable TotalEnergies to continue growing its dividend (5.9% increase in early 2026) and repurchase shares.
TotalEnergies’ strategy could power higher total returns
Chevron’s oil-focused investment strategy should fuel more than 10% compound annual free cash flow growth through 2030, which is a robust rate for a large oil company. However, TotalEnergies could grow at double that rate, driven by its heavy investment in expanding its integrated power business. That could give TotalEnergies the fuel to outperform Chevron over the next five years, making it look like the better buy. However, Chevron is still a strong option, especially for investors who want to avoid the risks of foreign-exchange fluctuations affecting dividend payments and the potential that France will enact a windfall oil profits tax due to the war-fueled surge in crude oil prices.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
