As crude fades, Big Oil must borrow to pay investors
crude prices and refining margins are likely forcing four of the five supermajor oil companies to borrow money to fund $15 billion in share buybacks for the most recent quarter, raising doubts over the payouts’ long-term sustainability.
Exxon Mobil Corp., Chevron Corp., Shell Plc, TotalEnergies SE and BP Plc are expected to post a 12% dip in earnings from last quarter to a combined $24.4 billion when they report results this week, according to the average of analysts’ estimates compiled by Bloomberg. That will leave them all — except Shell — unable to cover their dividends and buybacks with free cash flow, which is expected to be 30% lower than a year ago.
Share buybacks have become a cornerstone of Big Oil’s strategy as the post-Covid commodities rally spurred record profits and provided an opportunity to court investors betting against a fast energy transition. But with cash flow declining, those shareholder return pledges are now under strain. Crude prices are down about 17% from this year’s high even as tensions escalate in the Middle East. Third-quarter profits will be half the level of their record highs in 2022 and the lowest since 2021.
“The scales are tilting more bearish for oil prices as we look ahead,” said Noah Barrett, Denver-based lead energy research analyst at Janus Henderson, which manages about $361 billion. “They’ll likely have to lean on the balance sheet if they want to maintain the current pace of buybacks.”
Data Science
SQL for Data Science along with Data Analytics and Data
