Big Oil earnings show split in production strategy, shareholder returns
Exxon and Shell maintain buybacks amid oil price slump
Chevron and BP reduce buybacks due to market conditions
Exxon benefits from Guyana oilfield, Chevron seeks entry
By Sheila Dang and Shadia Nasralla
HOUSTON/LONDON, May 2 (Reuters) - Big Oil's first-quarter earnings have shown a clear split in how companies are positioned to weather the downturn sparked by a slump in oil prices to a four-year low in April.
Investors were focused on whether companies would cut share repurchases, since lower crude prices would leave them with less cash to fund the programs. Buybacks and dividends are key to investor interest in the oil industry. U.S. oil producer Exxon Mobil and UK-based Shell kept the pace of share buybacks. Their top rivals, U.S.-based Chevron and UK-based BP said they would reduce buybacks in the second quarter. The difference speaks to where each company is in its business cycle. Exxon has benefited from prolific production from its Guyana oilfield, the largest offshore oil find in at least a decade. A major player in the top U.S. oilfield, the Permian Basin, as well as in Guyana, Exxon increased production by 20% year-over-year. Both areas are highly profitable and the company is working to reduce its operating costs, said Exxon CEO Darren Woods.
"In this uncertain market, our shareholders can be confident in knowing that we're built for this," Woods said in the company's first-quarter earnings statement. Oil prices recorded their largest monthly drop since 2021 this week as investors priced in the expected damage to the global economy - and contingent fuel demand - from U.S. President Donald Trump's trade policies.
Exxon's net-debt-to-capital ratio was 7%. It was the only integrated oil company that did not increase net debt during the quarter, said Kim Fustier, head of European oil and gas research at HSBC.
Chevron's first-quarter oil and gas production was flat compared to the previous year as growth in Kazakhstan and the Permian was offset by loss of production from asset sales. Earlier this year, the company announced it would lay off up to 20% of its staff as part of an effort to simplify the business and cut up to $3 billion in costs. Chevron is attempting to buy into the Guyana play through the acquisition of one of Exxon's minority partners in the project, Hess. Exxon is in arbitration over that deal, and claims to have the right of first refusal for Hess' stake in the field.
Exxon repurchased $4.8 billion of shares during the first quarter, putting it on track to meet its annual target of $20 billion. Chevron said it would reduce buybacks to between $2 billion and $3.5 billion in the current quarter, down from $3.9 billion between January and March, which it said was a reflection of market conditions.
"Exxon's low-cost production gave it room to hold the line on buybacks, with Chevron pulling back as weaker oil prices bite," said Jake Behan, head of capital markets at financial products firm Direxion.
SHELL IMPRESSES, BP DISAPPOINTS In Europe, Shell's first-quarter earnings beat analyst expectations. The company said it planned to buy back $3.5 billion worth of shares over the next three months, the 14th consecutive quarter of a buyback program of at least $3 billion. BP missed earnings expectations with a 48% fall in profit to $1.4 billion and also slashed its share buyback program from around $1.8 billion to $750 million a quarter.
After the disappointing results, BP could miss consensus expectations for second-quarter earnings by 20%, said Biraj Borkhataria, an analyst at RBC Capital Markets, in a note.
"The combination of a weaker (free cash flow), higher leverage and patchy execution leaves us more cautious on the name versus peers," he wrote.
The British oil major is in the midst of a strategy change back toward oil and gas after a failed attempt to move more aggressively than rivals toward a low-carbon energy business model. BP had underperformed its biggest rivals before the downturn, making it a potential takeover target. Shell CEO Wael Sawan said on Friday he would rather buy back more of his company's own shares than bid for BP. Shell kept its investment budget at between $20 billion and $22 billion for the year, while BP said it will cut spending by $500 million, to a $14.5 billion budget.
BP also indicated it could offload more assets, increasing its outlook for asset sales this year to between $3 billion and $4 billion, from $3 billion previously. (Reporting by Sheila Dang in Houston and Shadia Nasralla in London; Editing by Rod Nickel)
First Published: 3 May 2025, 02:56 AM IST
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
20 minutes ago
- Mint
Nvidia teams up with Perplexity and Mistral AI: How will it impact Europe's AI infrastructure push?
Nvidia has announced new collaborations with AI firms Perplexity and Mistral AI as part of a broad initiative to strengthen artificial intelligence infrastructure and language model development across Europe. The announcement was made during an AI conference in Paris, where the US-based chipmaker outlined its strategy to support regional AI growth with both hardware and software solutions. In partnership with search firm Perplexity, Nvidia will work with over a dozen AI companies in Europe and the Middle East to refine their technologies and help distribute them to local businesses. This effort will involve the development of reasoning models—AI systems capable of handling more complex tasks—in various European languages, where training data is often limited. Mistral AI, a French startup, is joining forces with Nvidia to launch a new service called Mistral Compute, which will run on 18,000 of Nvidia's Grace Blackwell chips. The service will be based in the company's data centre in Essonne, France, with plans to expand across the continent. The aim is to facilitate domestic AI computing capabilities and reduce dependence on overseas infrastructure. Jensen Huang, Nvidia's chief executive, said that Europe urgently needs to scale up its AI infrastructure if it wants to stay competitive globally. The firm is supporting this push by partnering with cloud and telecom providers and enabling small-scale access to its AI accelerators—specialised chips used to train and deploy AI models. Kari Briski, Nvidia's vice president for generative AI software, said the company is producing synthetic data in low-resource European languages to help train more robust local models. "We're doing a lot of synthetic data generation and translating our reasoning datasets so they can be used in training," she said. Nvidia's collaboration includes firms in France, Germany, Italy, Poland, Spain and Sweden. Perplexity will support the deployment and accessibility of these models, ensuring they can be used by local enterprises for tasks such as content research and data analysis. The company's CEO, Aravind Srinivas, noted that Germany is already its second-largest market by revenue, underscoring the growing demand for regionally tailored AI services. As part of the broader rollout, Nvidia also confirmed that its AI Lepton service, which connects developers to essential compute infrastructure, will now include participation from AWS and Mistral. The company added that 'AI factories'—large-scale data centres for training and operating AI models—are being developed in over 20 European locations, several of which will be 'gigafactories' housing more than 100,000 chips. In the UK, companies such as Nebius Group and Nscale Global Holdings are also set to deploy thousands of Nvidia's AI semiconductors, while other countries, including Italy and Armenia, are preparing to upgrade their hardware systems. Despite Europe having over 1.5 million AI developers and nearly 10,000 businesses involved in Nvidia's Inception startup programme, the continent still lags behind the US in terms of infrastructure investment. Nvidia said it plans to triple the region's AI hardware capacity next year and increase total computing power tenfold. (With inputs from Bloomberg and Reuters)
Time of India
26 minutes ago
- Time of India
Trump Tariffs: Even if it leads to some demand destruction ..., S&P warning on smartphone and PC prices in the US
Smartphone and personal computer (PC) prices are expected to increase as manufacturers pass on higher costs from US tariffs to consumers, according to S&P Global Ratings. The agency predicts that even if demand decreases, companies will raise prices, particularly impacting the 45% of PC sales and the majority of smartphone sales driven by consumers. Tired of too many ads? go ad free now 'We expect PC and phone makers will pass on the higher cost to customers even if it leads to some demand destruction, especially for consumers who make up 45 per cent of PC sales and most of smartphone sales,' the global credit ratings agency said in a research note, seen by ETTelecom. It noted that smartphone makers, such as Apple and its key suppliers, and personal computer (PC) manufacturers heavily reliant on China, are the most vulnerable to the US tariffs. The note added: 'S&P Global Ratings believes the most vulnerable companies are those with the largest reliance on China's integrated technology production infrastructure and the U.S. as a major end market.' In particular, it said Apple and its key suppliers, including Hon Hai Precision Industry (Foxconn), may be the most disrupted due to reliance on China for production. Companies heavily reliant on China for production, such as Apple and its key suppliers like Foxconn, are the most vulnerable to the tariffs. Apple, holding over 60% of the US smartphone market as of Q4 2024, faces significant risk due to its China-based production, with iPhones accounting for nearly 50% of its revenue. The US represents about a third of Apple's global smartphone shipments. Similarly, PC makers Dell, , and Lenovo face risks due to high input costs and reliance on Chinese manufacturing for laptops, with US PC sales contributing 15-20% of their operating profits. Tired of too many ads? go ad free now While Apple is shifting iPhone production to India, expected to cover most US-bound shipments by 2026, and Samsung relies on Vietnam and India for production, both companies remain exposed to potential tariff increases. The Trump administration has imposed a 10% baseline tariff on all countries, including India, with China imposing reciprocal tariffs. Although consumer electronics like smartphones and laptops are currently exempt, President Trump has threatened a 25% tariff on smartphones made outside the US, targeting brands like Apple and Samsung. S&P notes that Xiaomi, with no direct US market exposure and chip production in Taiwan, is less affected by US tariffs or China's retaliatory measures. Meanwhile, the International Data Corporation (IDC) forecasts global smartphone shipments to grow by only 0.6% in 2025, down from a 2.3% projection, citing tariff-related uncertainties. India and Vietnam remain key alternatives to China for smartphone production, but additional 20-30% tariffs could disrupt the US market outlook. For PCs, Dell has shifted US-bound production outside China, and HP is expected to follow by June 2025. However, S&P cautions that moving assembly to the US won't fully mitigate tariff risks unless critical components like processors and display panels from Taiwan, South Korea, and China are exempted.
Time of India
26 minutes ago
- Time of India
Trade truce tested: Trump raises China tariffs to 55% even as rare earth deal advances; rights group flags forced labour risks in Xinjiang mineral supply chains
US President Donald Trump said the United States will receive magnets and rare earth minerals from China under a new deal, even as tariffs on Chinese goods are set to rise to 55%. The development comes amid renewed scrutiny over supply chains tied to China's Xinjiang region, where human rights groups allege the use of forced labour. Tired of too many ads? go ad free now The rare earth announcement and tariff hike followed two days of trade talks in London, where the US and China reached a tentative framework to resume stalled negotiations. The discussions reportedly focused on easing mineral and technology-related disputes that had threatened to unravel a fragile truce reached in Geneva last month, AP reported. The move comes as a new report by Netherlands-based Global Rights Compliance identified 77 Chinese companies in the titanium, lithium, beryllium, and magnesium sectors operating in Xinjiang—many allegedly linked to state-run 'labour transfer programs' involving Uyghur and other Turkic minorities. According to the report, these supply chains potentially impact global brands such as Avon, Walmart, Nescafe, Coca-Cola, and Sherwin-Williams, who may source materials like titanium from Xinjiang. These minerals are used in a range of products, from commercial paints and thermos cups to aerospace and auto components. 'Mineral mining and processing in Xinjiang rely in part on the state's forced labour programs for Uyghurs and other Turkic people in the region,' the report stated, urging companies to re-evaluate their sourcing. China's Foreign Ministry rejected the findings, calling them fabricated. 'No one has ever been forcibly transferred in Xinjiang under work programs,' said spokesperson Lin Jian. 'The so-called allegation of forced labour is nothing but a lie concocted by certain anti-China forces.' While the companies named in the report have not commented, the issue echoes long-standing concerns. A 2022 UN report said China may have committed crimes against humanity in the region, citing arbitrary detention of over 1 million Uyghurs. Tired of too many ads? go ad free now Under US law signed in 2021, imports from Xinjiang are blocked unless companies can prove their goods are free of forced labour. Initially targeting solar panels, tomatoes, and textiles, enforcement has since expanded to cover aluminum and seafood. The International Energy Agency recently warned that global critical mineral supply is becoming highly concentrated, with China dominating the refining and processing of lithium, cobalt, graphite, and other key inputs—many of which originate in or pass through Xinjiang. Despite the intensifying scrutiny, Trump's announcement signals that the US continues to rely on China for essential mineral supplies, even as broader trade tensions escalate.
