Analysis: BP, Shell will need to show investors plans for profit as oil prices slide
BP emerged from its shareholder showdown unscathed last week, fighting off rebellious activists with overwhelming support for its watered-down climate plans.
Not even the environmental protestors storming the stage rattled the energy giant’s mild-mannered chief executive, Bernard Looney, who persisted with his claim that fossil fuel exploration and cutting emissions was an ‘and’ question rather than ‘either or’.
But while its oil and gas production targets and climate goals have courted much controversy, investors ultimately care about making money.
For BP and Shell, who report earnings on Tuesday and Thursday respectively, we can certainly expect another round of hefty earnings, but investors will be keen to see how robust these profits are as gas and oil prices return to normal levels after being driven to record highs following Russia’s invasion of Ukraine.
Stateside fossil fuel players Chevron and Exxon Mobil posted monster earnings on Friday of £5.27bn and £9.17bn respectively over the first three months of this year.
While this is a slight dip on last year’s final quarter, when companies posted record full-year earnings, it is a like-for-like jump compared to the first three months of trading in 2022. It is also comparable to the rates of profit made in 2008 when oil was nearly double the price it is today at $145 per barrel.
But both oil majors were also more conservative in their forecasts for oil prices, with Exxon more sceptical of a China-fuelled rebound in prices as its economy revives in the second half of the year.
Yet, even as prices have come down, both Chevron and Exxon managed to record robust results, reaping the benefits of long-term investments.
New volumes of crude oil and fuels from the start-up of new offshore developments and refining facilities came online and powered its earnings.
Overall, the company’s oil and gas production rose to the most since 2019 to 3.83m barrels of oil equivalent per day (boed), up by 160,000 boed from the previous quarter.
Meanwhile, Chevron’s standout business was refining, where higher margins helped income surge more than five-fold to £1.44bn – with the company now regarded as the global leader in the sector.
With oil and gas prices lower and the outlook somewhat uncertain, business acumen and strategy will begin to have more of an influence over the bottom line of energy giants.
When BP and Shell report next week, investors keen to see whether they were diligent and took advantage of high prices for long-term gains or just banked the money and sat on their hands.