The world’s largest oil companies are sitting on Big Oil windfall profits rather than spending them. After their third-highest quarterly earnings on record, ExxonMobil Holdings Corp, Chevron Corp, BP Plc, Shell Plc and TotalEnergies SE are uncharacteristically cautious.
What Are the Supermajors Doing With Their Windfall Cash?
ExxonMobil and Chevron are stockpiling the cash. BP is paying down debt and other liabilities.
Shell and TotalEnergies promise to be cautious about future investments.
Shell chief executive officer Wael Sawan said: “We will be disciplined – we will not allow the surplus cash to burn a hole through our pockets.”
Why Did Big Oil Write Down US$180bil in Assets?
The five Western oil majors spent heavily on megaprojects during earlier high crude price periods. They wrote down about US$180bil in assets from 2010 to 2020 when oil fell.
ExxonMobil CFO Neil Hansen said: “We’re not going to ride the wave of the cycle.” The company chose not to raise share buybacks despite surging profits.
How Much Debt Do the Five Supermajors Carry Now?
The five supermajors carry about US$276bil of debt combined. That is almost 30% less than at the end of 2020, according to Bloomberg data.
- Chevron cut its buyback to US$2.5bil in the third quarter, the low end of its guided range.
- Chevron posted the fourth-highest profits in its history during that quarter.
- Shell increased its buyback 65%, but only within a framework that distributes a fixed percentage of cash flow.
Did Oil Stocks Keep Pace With Oil Prices This Year?
BP has rallied 45% this year, ExxonMobil is up 56% and Chevron 55%.
All three lagged the 2.4% gain in oil prices last Friday. The lack of additional buybacks is one reason cited.
Marcus McGregor, managing director of commodities research at Conning, which manages about US$191bil in assets, said: “Discipline is what we’re looking for.”
Why Is Big Oil’s Caution Different From Big Tech’s Spending?
Investors are punishing Big Tech for a debt-fuelled artificial intelligence spending frenzy that has yet to yield much cash return.
Some investors believe energy companies risk not investing enough for the future. Chevron CFO Eimear Bonner said: “We manage our business in decades, not quarters.”
Which Oil Stocks Are Worth Monitoring for Bursa Investors?
The article covers only US- and Europe-listed majors, and none is a Bursa Malaysia counter. The useful signal for Malaysian investors is the capital-allocation pattern: buyback cuts, debt paydown and cautious spending.
Compare how these decisions affect payouts using ourDividend Investing Guide.
Key Takeaways
- Big Oil is prioritising discipline after its third-highest quarterly earnings on record.
- Five supermajors carry about US$276bil of debt, almost 30% less than at the end of 2020.
- Chevron’s buyback was cut to US$2.5bil, the low end of its guided range.
- BP, ExxonMobil and Chevron rallied 45%, 56% and 55% this year, but lagged the 2.4% oil price gain last Friday.
Disclaimer: This article is for general information only and is not investment advice. Do your own research before making any investment decision.
Frequently Asked Questions
Why are oil companies not spending their windfall profits?
Major oil companies are wary of repeating past overspending during boom periods. Shell’s Wael Sawan said the company will be disciplined, while ExxonMobil is stockpiling cash.
How much debt do the five major oil companies have?
The five supermajors carry about US$276bil of debt combined. That is almost 30% less than at the end of 2020, according to Bloomberg.
How much did ExxonMobil and Chevron shares rise this year?
ExxonMobil is up 56% and Chevron is up 55% this year. BP has rallied 45%.
How much did Chevron cut its buyback?
Chevron reduced its buyback to US$2.5bil in the third quarter. That was the low end of its guided range, despite the fourth-highest profits in its history.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.
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