Record profits could convince oil majors to raise dividends

The world’s largest international oil and gas companies are expected to ramp up share buybacks, and some may increase their dividends next week when Big Oil is expected to post another strong quarter. Shareholders could expect higher returns as Shell, BP, TotalEnergies, Exxon and Chevron are all expected to post bumper and possibly record quarterly profits for the second quarter due to high commodity prices and margins. high refining over several years.

Some of the major international oil majors have already announced windfall profit expectations, particularly in their refining divisions, for the second quarter. Analysts expect at least some of them to step up share buybacks and some are even announcing higher dividends amid record cash flow and record or near-record earnings.

Second-quarter earnings for major majors set to be even higher than already successful income announced for the first quarter. Oil above $100 a barrel throughout the second quarter and rising refining margins amid rebounding gasoline demand will help Big Oil beat second-quarter booming first-quarter profits, it said. reported the companies and according to analysts.

Big Oil shareholders could see their returns improve significantly over the next few months, with the companies reporting second-quarter results next week. Previewing second-quarter results, the companies said they expected “exceptional” incomenotably in their refining divisions.

The French supermajor TotalEnergies said last week that “Refining and Chemicals results should be exceptional given the very high levels of cracking in distillates and gasoline”. ExxonMobil said in a filing with the SEC in early July, the sector’s rising margins are expected to add between $4.4 billion and $4.6 billion to its second-quarter results. At Shell, the refining margin almost tripled in the second quarter compared to the first quarter and is expected to add between $800 million and $1.2 billion to Shell’s Products division’s second quarter results compared to the first quarter of 2022.

So when Big Oil releases its second-quarter results, the market will be watching how much of those windfall profits will be returned to shareholders.

Related: China could see an unprecedented drop in LNG imports this year

Europe’s biggest companies – Shell, BP and TotalEnergies – are expected to boost share buybacks. Some analysts expect Shell to announce another dividend increase.

“Based on a long-term oil price of $70, we see significant potential for Shell to increase its dividend and move towards longer-term dividend growth,” said Jonathan Waghorn, portfolio manager. portfolio of the Guinness Global Energy fund. Reuters.

BP could also increase its dividend by 4% or possibly more, according to HSBC analysts quoted by Reuters.

US supermajors Exxon and Chevron may refrain from further upside targets on share buybacks after recently revising their buyback plans.

After doubling its first quarter earnings, Exxon announced in late April that it would triple its share buyback program to a total of $30 billion through 2023. Chevron, in early March, raised its share buyback forecast at $5-10 billion per year, down from earlier forecasts of $3-5 billion per year.

“With the increase in our dividend and redemptions in the middle of our updated guidance range, cash returned to shareholders is expected to increase by more than 50% over last year,” the CFO said at the time. de Chevron, Pierre Breber.

The windfall profits have already caught the attention of policy makers.

The UK, home to Shell and BP, has introduced a exceptional tax of 25%a new temporary 25% tax on energy profits for oil and gas companies, reflecting their windfall profits as oil and gas prices rise.

In the United States, President Joe Biden continues to challenge oil companies for their profits and to ask to pass on to consumers the 20% drop in oil prices since mid-June.

‘Exxon Made More Money Than God This Year,’ President Biden Says said earlier this year.

By Tsvetana Paraskova for Oilprice.com

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