LONDON: Major energy companies are set to borrow billions to maintain shareholder payouts or cut the rate of share repurchases in the face of a drop in oil prices after more than two years of bumper profits, analysts said.
The majors have for decades attracted investors by promising steady payouts even as the transition to lower carbon energy has cast doubt over the industry’s long-term prospects.
BP, Chevron, Exxon Mobil, Shell and France’s TotalEnergies have paid investors more than $272 billion in dividends and share repurchases since the start of 2022. Energy prices surged after Russia invaded Ukraine in February 2022 and as the global economy emerged from the pandemic, generating record profits for the energy industry.
The payout has since been almost double the rate over the previous 10 quarters, Reuters calculations found.
But a drop in benchmark crude oil prices to below $70 a barrel last month, their lowest since late 2021, coupled with a sharp decline in profits for refining oil into fuels, is set to cut earnings in the coming quarters.
Several banks have in recent weeks cut oil price forecasts in response to a weak demand outlook and trimmed profits forecasts for the sector.
“With moderating oil prices and weak refining margins, 2025 could be seen as a lost year for the sector,” RBC Capital Markets analyst Biraj Borkhataria said.
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