Big Oil commits to Big Returns for shareholders as profits keep flowing
Over the past two weeks, we’ve seen some of the world’s largest oil and gas producers unveil their 2023 results.
While profits, for the most part, declined compared to 2022’s bumper haul, producers have lavished rewards on their shareholders.
Despite a weaker oil market, US majors ExxonMobil and Chevron along with UK firms Shell, and BP and French supermajor Total Energies are set to pay a total of $113.8bn (£90bn) in dividends and share repurchases for 2023.
But which companies have been the most generous?
Shell and BP earned bumper profits in 2023. The former recorded its second-largest cash flow in history at $54.2bn (£42.9bn) while BP recorded $13.8bn (£10.9bn) in profits, its second-biggest haul.
And yet the looming necessity of the green transition away from both firms’ core businesses weighs on them.
In 2023, Shell distributed $23bn (£18.2bn), 42 per cent of its cash flow from operations, back to shareholders and this month announced a further $3.5bn (£2.7bn) of share buybacks and increased its dividend by 4 per cent to $0.34 a share.
Jeffries analysts have suggested the firm could repurchase up to 50 per cent of its shares by 2030 – equivalent to £80bn of capital returns at current prices – an estimated 42 per cent of cash flow from operations during the period going back into shareholders’ pockets.
BP, meanwhile, announced plans to initiate a $1.75bn (£1.3bn) share buyback ahead of its first-quarter results while pledging to allocate $3.5bn (£2.7bn) for share repurchases in the first half of 2024 alone.
If all things track well and the market holds up to its existing and pipelined investments, BP is setting its sights on executing share buybacks of at least $14bn (£11.1bn) by the end of 2025.
Across the pond, it’s been a somewhat similar top-level story
Exxon and Chevron‘s market caps have soared above those of Shell and BP on the back of surging output and cash returns.
Exxon has said it plans to increase its annual share repurchase program to $20bn (£15.8bn) in 2024 and 2025 after its recent deal to acquire Pioneer Resources closes – that’s up from $17.5bn (£13.8bn) last year.
Chevron paid its shareholders back 32 per cent more last year than it did in 2022; $11.3bn (£8.9bn) through dividends and $14.9bn (£11.8bn) in stock buybacks.
It plans to run a modest share buyback scheme for its size through the next 12 months, at the low end of its $10bn (£7.9bn) to $20bn (£15.8bn) annual target range.
Until now, the firms have continually rebuffed attempts by climate-focused investors to enforce emissions-lower practices.
But the shareholder obligation-net zero conundrum is not going away. For firms on both sides of the Atlantic, they are only really subjected to periods of intense climate scrutiny when their results surface.
Buybacks as a distraction are unlikely to be a panacea to even the most return-focused investors moving forward.