A Fight for a Knife in the Mud
Chevron, Exxon, and the Art of Weaponized Capital Return
I have a theory: everything in business is sales.
Not just “sales” in the way oil and gas uses it—selling barrels, signing midstream contracts, negotiating marketing volumes—but capital-S sales. You’re selling your story. You’re selling your plan. You’re selling that your company is the best, least dumb capital allocator in a capital-intensive industry with a trust deficit.
And no one has to sell harder than an oil major executive with a slide deck, a WTI strip in the 60s, and a room full of BlackRock analysts asking, “Okay, but what if we just owned Apple instead?”
To spice things up, I sometimes like to think of oil and gas stories as TV analogs. I love dramatic series. I especially love business dramatic series. Which means I might have a Succession tattoo on my lower leg.
So when it comes to how the biggest O&G companies—Chevron and Exxon—position themselves strategically, I like to think of them as Kendall and Roman vying for the top. (You can pick which is which.) It’s fitting, given one of Logan’s famous lines: “Life isn’t knights on horseback. It’s a fight for a knife in the mud.”
A fight in the mud it is—but the tools are even simpler than just a knife.
Because here’s the thing: the two companies are competing for the same customers. Not end-users of oil and gas, but the institutional investors who dominate their shareholder bases. Vanguard, BlackRock, and State Street hold massive stakes in both. The top 25 shareholders own nearly 50% of Chevron and over 40% of Exxon. These aren’t investors debating frac design—they just want energy exposure in the portfolio. And they don’t necessarily need both CVX and XOM. They just need one to do the job.
So what tools do the firms have at their disposal for this mud fight? Asset base. Capital return strategy. And when things get really dire? Right of First Refusal.
and, like they say on Succession ,“You can’t make a tomelett without breaking some Greggs.”
Let’s say you’re sitting at home watching TV. You flip on Landman, and between Billy Bob Thornton’s fast talking and the montage of workover rigs moving across dusty lease roads, you get fired up about West Texas oil. You want exposure. So you hop on Robinhood.
You’ve got plenty of choices, but lets say you want Fortune 500 so you focus on two: Chevron or Exxon. Honestly, I much prefer Exxon’s Permian setup—more scale, better integration—but the truth is, either ticker gives you a taste of the WTX action.
Now you’re on vacation. Feeling adventurous, you book a trip to Guyana and post up on a beach. Out in the Atlantic, you spot a gorgeous FPSO lazily floating near the horizon. You sip your drink, think about first oil, and feel the itch again. Back on Robinhood (you’ve got diamond hands, after all), you open the app. This time, your options are limited: you buy Exxon.
(We’ll hold the Hess thought for now.)
The point is this: the modern energy sector has moved from global soup to curated portfolio. You’re no longer buying some haphazard mix of fields from 18 countries—you’re buying themes.
So what do you get when you pick Chevron?
Tengizchevroil (Kazakhstan): A 50% stake in one of the world’s largest oil fields. Contributes ~20% of CVX’s global production. $5B in distributions expected in 2025. Post-2033? Declines.
Permian Basin: ~960 MBoed. Mid-cycle growth. Recently pivoting rigs toward Delaware Basin after New Mexico wells outperformed.
Australia LNG (Gorgon & Wheatstone): Long-duration, Asia-facing LNG assets. Quietly essential to Chevron’s low-carbon narrative.
And what do you get with Exxon?
Guyana (Stabroek Block): 45% operator stake in the most prolific offshore development in the western hemisphere. Targeting >1.2MM Bbl/d. Could generate 20%+ of Exxon’s FCF by 2030.
Permian Basin: Similar scale to Chevron, but with more vertical integration. Aims for 2.0MM Boed by 2027.
Global LNG (Qatar, Nigeria, PNG): Breadth, optionality, and exposure to the energy transition narrative—especially across Asia and Europe.
Chevron gives you stability and long-cycle cash. Exxon gives you growth and global gas scale. Both give you Permian—but not in equal flavor.
Capital Returns: The Strategic Split
Nobody needs to hear me get back on my soapbox about how oil and gas capital returns have changed. Money now, not later.
But there are different ways to give that money now. Think casino-style—lots of different games on the floor, all designed to pay out, just with different odds, different timing, and different tax implications.
And look, I get it—both of these companies use all of them. I’m splitting hairs. But this is my newsletter, and I’ll split ’em if I want to.
If I had to generalize the differentiation, it would go like this:
Chevron is the buyback king. Over the last five years, it’s returned $75 billion to shareholders, with a heavy tilt toward share repurchases. In 2024 alone: $15.2B in buybacks, $11.8B in dividends. Even in Q1 2025, they pulled off $3.9B in buybacks, though $2.3B of that was quietly spent acquiring Hess shares on the open market.
Exxon is the dividend aristocrat. Forty-two consecutive years of dividend increases. In 2024: $16.7B in dividends, $18.3B in buybacks, for a combined $35B returned to shareholders. In Q1 2025? Another $9.1B, split almost evenly. They’ve committed to $20B/year in repurchases through at least 2026.
Buybacks are nice. They’re flexible. They’re quiet. They don’t trigger investor revolts the way dividend cuts do. And they also function as oil and gas’s version of Affirm: Buy now, pay later. Use equity to fund an acquisition, dilute today, then buy back stock tomorrow—using the very cash flows the new asset generates.
See: PDC. Pioneer. Denbury. Hess…
Chevron’s Quarter Was Strong. But That’s Not the Story.
Chevron had a great quarter. Really.
Earnings beat: $2.18 vs. $2.13
Upstream volumes: up 2% sequentially
Refining margins: stronger than expected
Tengiz: tracking to distribute $5B in 2025
This is the kind of quarter that, in another timeline, would be followed by a confident shrug and a $5 billion buyback flex.
But instead, Chevron pulled back. Q2 buyback guidance came in at $2.5–$3.0 billion, down from the $3.9 billion reported in Q1. Still technically inside the $10–$20 billion range they’ve stuck to for years—but let’s be honest, they’re now skating along the bottom edge of that band.
And even Q1’s number deserves a footnote. Of the $3.9 billion in “repurchases,” $2.3 billion went toward quietly acquiring Hess shares—just under 5% of the float—on the open market. Not Chevron stock. Not capital returned in the classical sense. More like a chess move written in the language of capital markets.
Yes, it was strategic. But sometimes you don’t spend $2.3 billion to gain voting power—you spend it to send a message. To investors. To Exxon. To arbitrators. Something like: We’re not just confident this deal closes—we’re already acting like it’s ours. A sort of pre-merger body language, disguised as shareholder return.
Which brings us to the official explanation: “market conditions.” A polite, almost gentlemanly way of saying, oil’s at $60 and leverage ticked up more than we’d like.
And sure, when the market hands you a golden excuse to slow down, you take it. Prudence plays well with institutional money. Nobody gets benched for caution in Q2.
But maybe—just maybe—that caution rings a little louder when everyone knows your real earnings event isn’t the one you report. It’s the one you arbitrate.
On May 28th.
The Knife in the Mud: Arbitration as Strategy
Outside the U.S., oil and gas projects are expensive and risky. Like, really risky. I remember sitting on the Hoover-Diana platform out of undergrad and watching a single mistimed boat call burn through a quarter-million dollars—per day.
So how do companies de-risk that kind of exposure? The same way you and I de-risk investing in a Penn State football suite (Venmo linked below): you syndicate the cost. You call your buddies. Divide up the interest. Share the upside.
But unlike agreeing on who gets the Michigan game and who gets Rutgers, offshore oil isn’t that simple. These deals get wrapped in layers of contracts, one of the most important being the Joint Operating Agreement, or JOA.
That’s what Exxon did in Guyana. They operated. Hess chipped in. The play blew up—geologically, economically, and geopolitically. And the JOA? It included one very important clause: the Right of First Refusal (RoFR). Because when you’ve built a multibillion-dollar offshore asset with trusted partners, the last thing you want is to wake up and find out you’re now business-married to Rome Roy.
So when Chevron announced its plan to buy Hess, Exxon invoked the clause.
At the time, I said it was a sharp move by Exxon. And yes, maybe I’m biased—I started my career there, and I have a double-X tattoo just below my Succession tattoo—but strategically? It still holds.
Worst case: the arbitration fails. You lose the legal fees, maybe issue a carefully worded 8-K, and deal with some philosophical debates about JOA precedent.
Best case: you block the deal entirely. Your biggest competitor doesn’t get access to what is arguably the best upstream asset on the planet. And Hess? Now it’s a free agent. A floating asset. And Exxon, whose stock has outperformed Hess by ~16% since Chevron announced the deal, could theoretically step in and buy Hess at a 15–20% discount to Chevron’s original offer.
Back in October, Chevron was using its stock to buy Hess at ~$171/share. Today? That math looks very different.
Of course, Exxon says this isn’t about buying Hess. It’s about the sanctity of JOAs.
Officially.
My money’s still on Exxon.
Not because I think the case is bulletproof, but because of how the market’s pricing the risk. The HES-CVX deal spread is still hovering around 7–9%, unusually wide for a big-cap, all-stock deal with minimal regulatory barriers. That implies investors see a real chance of disruption—most analysts I’ve read peg the odds of an Exxon arbitration win somewhere between 65–75%.
Exxon argues the contract says what it says: RoFR applies.
Chevron argues this is a merger, not a divestiture—85% of Hess’s value is Guyana, yes, but this isn’t a carveout.
The more interesting question is what Chevron does if it loses.
Because if Guyana slips away, Tengiz becomes a countdown clock. The Kazakh cash cow begins to taper post-2033. And that creates a real problem. Not just for future production, but for capital markets storytelling. As Diamondback’s investor letter reminded us this week, Tier 1 assets are getting harder and harder to come by.
So yes—dividends matter. Cost control matters. Efficient drilling matters.
But we’re entering a phase where inventory scarcity becomes a strategic liability.
And if the Hess deal falls apart, Chevron will have to tell a new story. One with fewer obvious growth legs—and one where preserving optionality matters more than ever. Which makes stepping off the buyback throttle look…less like market discipline and more like arbitration hedging.
If Logan Roy was right—and life (and business) is a fight for a knife in the mud—
Then come May 28th, I think that mud’s about to get a whole lot messier.
When the Factory Runs Out of Parts
Speaking of Diamondback…
Last week, I wrote about how to run a factory when the machines decline every day.
The premise was simple: oil and gas is a manufacturing business—except the machines (wells) lose output the moment you flip them on. That reality forces a ruthless focus on capital efficiency. You reinvest just enough to offset declines, and no more.
But there’s a catch I only hinted at:
What happens when the factory runs out of parts?
Or more specifically—what happens when inventory is finite, and the remaining locations aren’t worth the reinvestment?
This week, we got another data point.
Diamondback just cut capital by 10%. Not because they missed numbers. In fact, they beat production guidance in Q1. But because, in their own words:
“Geologic headwinds outweigh the tailwinds provided by improvements in technology.”
They’re not chasing growth. They’re prioritizing return on capital. And rather than drill marginal wells, they’re pulling back rigs and shifting to buybacks.
Sound familiar?
Matador made the same move last month—initiating share repurchases for the first time in company history.
There’s a through-line here:
Operators aren’t just becoming disciplined.
They’re becoming honest.
They’re acknowledging something fundamental:
The rock isn’t what it used to be.
The opportunity cost of drilling marginal inventory is rising.
And the next best use of capital might be buying back your own stock, not drilling another well.
The machines still decline.
But now, the parts are running out.
And for the first time in a long time, we’re seeing the capital strategy shift to reflect that.
New Basin, New Exchange: Comstock’s Double Step-Out
Up top, I wrote that oil and gas executives have the most difficult sales job in business.
Not because the product is complicated. It’s the opposite. Crude is crude. Gas is gas. You can’t charge a premium for “Haynesville artisanal molecules.” So instead, you’re selling capital efficiency, geological leverage, free cash flow predictability—and maybe above all else, access.
Which is why oil and gas CEOs don’t just sell hydrocarbons. They sell stock.
And like any good salesperson, when the room isn’t buying… you try a new room.
That’s the context behind Comstock’s announcement that it will dual list on the Texas Stock Exchange (TXSE).
It’s not a financing transaction. It’s not about liquidity (not yet, anyway). It’s a signal. A calculated move to broaden the stage, plant a flag in the backyard of its biggest investor (Jerry Jones), and maybe, just maybe, tell its story in a place where Haynesville gas isn’t a second-tier headline.
And if that sounds like a branding play disguised as a capital market move—it is.
But that doesn’t make it unserious.
The Product? 520,000 Net Acres and a Step-Out that Landed
In the same quarter, Comstock also reported something with much more tangible impact:
A successful 24-mile step-out well—the Olajuwon—in Freestone County. The company brought the well online at 41 MMcf/d, confirming its thesis across the northeastern edge of the Western Haynesville. The rock quality matched expectations, and the well materially de-risked acreage the company had previously leased and sat on.
It’s a big deal. A rare upstream “open new zone” moment in a world where most acreage maps are fully known, if not fully drilled.
And it’s happening under the guidance of a cap table that’s just as unique. Jerry Jones—the NFL owner, Landman guest star, and executive chairman—has quietly acquired a 71% stake in Comstock, including over $150 million in open-market purchases over the last three years.
If you’re wondering why the company chose TXSE as its second home: it’s not just symbolic.
It’s strategic. It puts the company squarely in the capital markets conversation for:
Texas-based family offices
Energy-specific LP mandates
Future regional ETFs or indexes with a TXSE hook
There are few precedents for this. The closest analog may be Berkshire Hathaway’s A/B share structure—where the A shares are the legacy voting class, and the B shares unlocked access for broader participation and passive inclusion. Comstock’s move may one day mirror that logic: different exposure, same underlying asset.
This is a Signal
Analysts framed the dual listing as a “low-cost, high-visibility lever” for Comstock to access untapped investor segments. No immediate capital benefits, but long-term strategic optionality. A bet that capital flows will continue to fragment—and that Texas may become its own gravity well for upstream capital.
The earnings themselves were mixed:
Revenue: $405 million, +21% YoY
Adjusted net income: $54 million, up from a loss in Q1 2024
Production: Down 17% YoY, largely due to deferred completions
Costs: Creep slightly upward—but manageable
The story, however, isn’t quarterly numbers. It’s positioning.
Geological and capital.
There are plenty of reasons to be optimistic about what Comstock holds in the Haynesville—especially after a high-velocity, high-confidence step-out. Whether that value gets monetized on the NYSE… or on a Texas-based exchange with a little more barbecue and a little less coastal cynicism?
We’ll see.
But one thing’s clear:
Comstock isn’t changing its product.
It’s just expanding where it sells it.