ExxonMobil and Shell keep buying back amid low oil prices
Herringbone and BP reduce buybacks due to market conditions
ExxonMobil benefits from Guyana oil field, Chevron seeks entry
Sheila Dang and Shadia Nasralla
HOSTON/LONDON, May 2 (Reuters) – Big Oil's first-quarter earnings show that the company is positioned clearly differently to bring oil prices down to a four-year low in April, a recession that has produced a recession.
Investors focus on whether companies will cut back on share buybacks, as lower crude oil prices will give them less cash to fund these programs. Buybacks and dividends are key to investors in the oil industry. U.S. oil producers Exxon Mobil and British Shell have maintained their share buybacks. Their top competitors, U.S.-based Chevron and UK-based BP said they will reduce buybacks in the second quarter. The difference lies in the position of each company in its business cycle. Exxon has benefited from its production of Guyana Oilfield, the largest offshore oil discovery in at least a decade. Exxon is a major player in the top U.S. oil fields, Permian Basin, and Guyana, up 20% year-on-year. ExxonMobil CEO Darren Woods said there were high profits in both areas and the company was working to reduce its operating costs.
“In this uncertain market, our shareholders are confident that we know we have built it for that,” Woods said in the company's first-quarter earnings statement. Oil prices recorded the biggest monthly decline this week since 2021 as investors posed the expected damage to the global economy by U.S. President Donald Trump's trade policy and contingent demand for fuel.
ExxonMobil's net capital ratio is 7%. Kim Fustier, head of European oil and gas research at HSBC, said it was the only comprehensive oil company that did not increase its net debt in the quarter.
Chevrons' first-quarter oil and gas production was flat compared to the previous year, as Kazakhstan's growth and the Permian were offset by production losses from asset sales. Earlier this year, the company announced it would lay off employees as part of its efforts to streamline its business and cut $3 billion in costs. Chevron attempts to buy Guyana's game by acquiring Hess, one of Exxon's minority partners in the project. Exxon is arbitrating the deal and claims to have the right to deny Hess stake in the field first.
ExxonMobil bought back $4.8 billion in shares in the first quarter, which puts it on track to meet its $20 billion annual target. Chevron said that the repurchase for the quarter will be reduced from $3.9 billion between January and March to between $2 billion and $3.5 billion, a reflection of market conditions.
“Exxon's low-cost production gives it enough room to hold the boundaries of buybacks, and Chevron is gradually withdrawing from oil prices,” said Jake Behan, head of capital markets at financial products company Direxion.
Shell impressed with BP in Europe, disappointingly, Shell's first-quarter revenue beat analyst expectations. The company said it plans to recycle $3.5 billion worth of shares in the 14th consecutive quarter of repurchase of at least $3 billion in stocks in the next three months. BP missed earnings expectations, profits fell 48% to $1.4 billion, and also cut its share buyback program from about $1.8 billion to $750 million per quarter.
Biraj Borkhataria, an analyst at RBC Capital Markets, said BP could miss consensus expectations for second-quarter earnings after disappointing results.
“The combination of weaker (free cash flow), higher leverage and fragmented execution makes us more cautious about this name and peers,” he wrote.
BP specializes in strategy to restore oil and gas, after trying to make more positive progress towards the low-carbon energy business model. BP has performed poorly before the decline, which is a potential takeover target. Shell CEO Wael Sawan said Friday he would rather buy back his own shares than bid for BP. Shell kept its investment budget between $20 billion and $22 billion that year, while BP said it would reduce spending by $500 million to $14.5 billion.
BP also said it could offload more assets, from the previous $3 billion to the asset sales outlook this year to $3 billion to $4 billion. (Reported by Sheila Dang in Houston and Shadia Nasralla in London; Editor of Rod Nickel)
