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Mint
02-05-2025
- Business
- Mint
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
Yahoo
02-05-2025
- Business
- Yahoo
Big Oil earnings show split in production strategy, shareholder returns
By Sheila Dang and Shadia Nasralla HOUSTON/LONDON (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. Sign in to access your portfolio
Yahoo
29-04-2025
- Business
- Yahoo
BP reports 48% profit drop as strategy chief exits
By Shadia Nasralla LONDON (Reuters) -BP on Tuesday reported a deeper-than-expected 48% drop in net profit to $1.4 billion on weaker refining and gas trading and announced the departure of its strategy chief as it tries to shore up investor confidence. CEO Murray Auchincloss is under pressure from activist investor Elliott to improve profitability and cut costs. He has announced plans to sell $20 billion of assets through to 2027. The British energy giant is abandoning a move to slash hydrocarbon production and boost its low-carbon business, plans pushed by strategy and sustainability chief Giulia Chierchia who announced on Tuesday that she would step down on June 1. U.S. fund manager Elliott Investment Management had wanted a change of strategy chief as it seeks higher free cash flow through deeper cuts to spending and costs, sources familiar with the matter told Reuters. BP's shares have lagged peers since its foray into renewables under previous CEO Bernard Looney who brought Chierchia into BP. They were down more than 4% after Tuesday's profit miss, compared with a 1% fall in a wider index of energy companies. BP posted a first-quarter underlying replacement cost profit, or adjusted net income, of $1.38 billion, below the $1.53 billion expected by analysts in a company-provided poll. That was down from $2.7 billion a year earlier. Profit at its gas and low-carbon unit was down around 40%, hit by weaker trading and lower production after asset sales. Its customers and products business was down by around 47%. BP said it expects to conduct a heavy refinery maintenance programme in the second quarter, which likely means lower output. Amid an industry-wide fall in refining profitability, BP's refining margins averaged $15.20 a barrel in the first quarter, down from $20.60 a year earlier. BP is buying back $750 million in shares for the quarter, at the low end of its guided range. That marks a slowdown from buybacks that totalled $7.1 billion last year. It increased its outlook for asset sales this year to $3-$4 billion from $3 billion. It said it would spend $14.5 billion this year, around $500 million less than its previous guidance, and reiterated its $13-$15 billion target for next year and 2027. Global benchmark Brent crude prices averaged around $75 a barrel during the January-March quarter, compared with around $87 a year earlier. Earlier this month, oil prices went into free fall after U.S. President Donald Trump announced tariffs on trading partners and Brent is now hovering around $66 a barrel. "In the event of sustainably lower prices, we would expect deflation to become evident across our capital plans and we see around $2.5 billion of further capital flexibility, should we require it," Auchincloss said in a presentation. "This is equivalent to around $10 per barrel of oil price sensitivity." Elliott has increased its stake in BP to just over 5%, placing it between top shareholders BlackRock and Vanguard, LSEG data shows.
Yahoo
28-04-2025
- Business
- Yahoo
BP share buyback outlook at risk from oil price slump, analysts say
By Shadia Nasralla LONDON (Reuters) - BP (BP.L) may be forced to cut or even scrap its share buyback programmes over the next year unless oil prices recover, analysts say, adding that would increase pressure on its already underperforming shares. Oil majors and other resource companies have made increased use of share buybacks and dividends to reward shareholders in recent years. Three analysts said the risk for BP was that weaker oil prices would mean it could not sustain its buyback programme, aggravating the problem of BP's underperformance versus peers. A February strategy revamp was designed to overcome investor doubts. The revamp, however, included BP shrinking guidance for its first-quarter buyback to $0.75-$1.0 billion, implying a $3-$4 billion annual buyback, as it tries to cut debt. This compares with a $3.5 billion buyback programme for the first quarter alone at Shell, which has said it will continue buybacks even if oil prices fall to $50 a barrel. Currently international Brent crude is trading above $65, but is under pressure from increased output from the OPEC+ producer group and the economic risks of U.S. tariffs. UBS analyst Joshua Stone said he expected BP's quarterly buybacks to fall to a quarterly $500 million after the first quarter. He said the market was pricing BP shares on the basis of a buyback programme of around $3 billion a year. It means BP's stock could fall by 15% if it cut the buyback to $2 billion a year and by 30% if the buyback was scrapped, said Stone. RBC analysts, meanwhile, expect BP to suspend all buybacks next year if oil falls to $60 a barrel. "Given its higher leverage position than peers, we've had more questions on what price BP can sustain its current buyback at than any other company," RBC analyst Biraj Borkhataria wrote in a note this month. Bank of America expects BP will cut buybacks to $2.5 billion this year if oil prices trade at $65 a barrel. At $60 a barrel, BofA also anticipates BP would suspend its buybacks. At its February strategy update, BP said it assumed Brent prices would average $71.5-$74.4 a barrel between 2025-2027, while benchmark Henry hub gas prices would be $4.1-$4.3 per million British thermal units through 2027 compared to the current prices of around $3. Asked about buybacks, a BP spokesperson referred to the February strategy update, when BP said it aimed to distribute 30-40% of operating cash flow via dividends, which it plans to raise by 4% a year, and buybacks. BP has said that, in addition to its disposal programme, it is cutting its costs by $4-$5 billion a year, expects its refining business to improve and has projects starting up that will help its cash flow. BP is due to report first-quarter results on April 29.
Yahoo
23-04-2025
- Business
- Yahoo
BP share buyback outlook at risk from oil price slump, analysts say
By Shadia Nasralla LONDON (Reuters) - BP may be forced to cut or even scrap its share buyback programmes over the next year unless oil prices recover, analysts say, adding that would increase pressure on its already underperforming shares. Oil majors and other resource companies have made increased use of share buybacks and dividends to reward shareholders in recent years. Three analysts said the risk for BP was that weaker oil prices would mean it could not sustain its buyback programme, aggravating the problem of BP's underperformance versus peers. A February strategy revamp was designed to overcome investor doubts. The revamp, however, included BP shrinking guidance for its first-quarter buyback to $0.75-$1.0 billion, implying a $3-$4 billion annual buyback, as it tries to cut debt. This compares with a $3.5 billion buyback programme for the first quarter alone at Shell, which has said it will continue buybacks even if oil prices fall to $50 a barrel. Currently international Brent crude is trading above $65, but is under pressure from increased output from the OPEC+ producer group and the economic risks of U.S. tariffs. UBS analyst Joshua Stone said he expected BP's quarterly buybacks to fall to a quarterly $500 million after the first quarter. He said the market was pricing BP shares on the basis of a buyback programme of around $3 billion a year. It means BP's stock could fall by 15% if it cut the buyback to $2 billion a year and by 30% if the buyback was scrapped, said Stone. RBC analysts, meanwhile, expect BP to suspend all buybacks next year if oil falls to $60 a barrel. "Given its higher leverage position than peers, we've had more questions on what price BP can sustain its current buyback at than any other company," RBC analyst Biraj Borkhataria wrote in a note this month. Bank of America expects BP will cut buybacks to $2.5 billion this year if oil prices trade at $65 a barrel. At $60 a barrel, BofA also anticipates BP would suspend its buybacks. At its February strategy update, BP said it assumed Brent prices would average $71.5-$74.4 a barrel between 2025-2027, while benchmark Henry hub gas prices would be $4.1-$4.3 per million British thermal units through 2027 compared to the current prices of around $3. Asked about buybacks, a BP spokesperson referred to the February strategy update, when BP said it aimed to distribute 30-40% of operating cash flow via dividends, which it plans to raise by 4% a year, and buybacks. BP has said that, in addition to its disposal programme, it is cutting its costs by $4-$5 billion a year, expects its refining business to improve and has projects starting up that will help its cash flow. BP is due to report first-quarter results on April 29. Sign in to access your portfolio
