BIG BOYS

Oil supermajors make $20.5bn, pump $49.9bn to investors

Five largest private-sector oil supermajors have dropped more than a half-trillion on shareholders over last decade.

In Summary

•The five supermajors—ExxonMobil, Chevron BP, Total and Shell—generated $20.5 billion (Sh2.2 trillion) in free cash flow.

•They rewarded shareholders with $49.9 billion (Sh5.5 trillion) in dividends and share buybacks in 2020.

A 3D-printed oil pump jack is seen in front of a displayed stock graph and "$0 Barrel" words in this illustration picture, April 20, 2020. REUTERS/Dado Ruvic/Illustration
A 3D-printed oil pump jack is seen in front of a displayed stock graph and "$0 Barrel" words in this illustration picture, April 20, 2020. REUTERS/Dado Ruvic/Illustration

The world’s five largest private-sector oil and gas companies collectively spent $29.4 billion(Sh3.2 trillion) more on shareholder payouts than they generated from operations in 2020, according to a new report.

The five supermajors—ExxonMobil, Chevron BP, Total and Shell—generated $20.5 billion (Sh2.2 trillion) in free cash flow, according to a new report by the Institute of Energy Economics and Financial Analysis (IEEFA).

Investors can no longer count on the oil and gas supermajors to generate abundant, sustainable cash returns
Trey Cowan, IEEFA energy analyst

This is defined as the amount earned from their core business operations minus capital expenditures.

Meanwhile, they rewarded shareholders with $49.9 billion (Sh5.5 trillion) in dividends and share buybacks in 2020.

“These results spotlight a harsh reality,” said Trey Cowan, an IEEFA energy analyst and co-author of the report, “Investors can no longer count on the oil and gas supermajors to generate abundant, sustainable cash returns.”

The report found that the five companies have reported $325 billion in free cash flows over the last decade while rewarding shareholders with $561 billion—more than a half-trillion dollars—in share buybacks and dividends.

The supermajors have funded their investor-pleasing spree by selling assets and taking on long-term debt. Even though a recent spike in oil prices and increase in demand from an easing of the global COVID pandemic have been cause for optimism, investors are beginning to take notice. Standard & Poor’s Global Ratings lowered the ratings of both ExxonMobil and Chevron to AA-, noting that the industry faces a “more difficult operating environment.”

“Generous dividends and share buybacks give the globe’s largest private oil and gas companies a veneer of blue-chip financial performance,” said Clark Williams-Derry, an IEEFA financial analyst and co-author of the report. “But closer examination reveals an underlying financial weakness.”