The world’s largest international oil and gas companies are expected to accelerate share repurchases, and some could raise dividends next week when Big Oil is expected to report another very strong quarter. Shareholders could be in for higher returns as Shell, BP, TotalEnergies, Exxon, and Chevron are all forecast to post exceptional and possibly record quarterly earnings for the second quarter due to high commodity prices and multi-year-high refining margins.
Some of the top international oil majors have already announced expectations of blockbuster earnings—especially in their refining divisions—for Q2. Analysts expect at least some of them to step up share buybacks and some even to announce an increase in dividends amid record cash flows and record or near-record earnings.
The second-quarter earnings for the top majors are forecast to be even higher than the already blockbuster earnings reported for the first quarter. Oil above $100 per barrel throughout the second quarter and surging refining margins amid rebounding gasoline demand will help Big Oil beat in Q2 the blowout earnings from Q1, companies signaled and analysts say.
Big Oil’s shareholders could see their returns much improved in the coming months as companies report Q2 earnings over the next week. Previewing Q2 results, firms have said they expect “exceptional” earnings, particularly in their refining divisions.
France’s supermajor TotalEnergies said last week that “Refining & Chemicals results are expected to be exceptional given the very high levels of distillate and gasoline cracks.” ExxonMobil said in an SEC filing in early July that the rise in industry margins is set to add between $4.4 billion and $4.6 billion to its Q2 results. At Shell, the refining margin nearly tripled in Q2 compared to Q1 and is expected to add between $800 million and $1.2 billion to the second quarter results of Shell’s Products division compared to the first quarter of 2022.
So when Big Oil reports Q2 earnings, the market will be watching how much of those exceptional earnings will be returned to shareholders.
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Europe’s biggest firms—Shell, BP, and TotalEnergies—are expected to boost share repurchases. Some analysts expect that Shell could announce a further dividend increase.
“Based on a $70 long-term oil price, we see significant potential for Shell to increase its dividend and guide towards longer-term dividend growth,” Jonathan Waghorn, portfolio manager at the Guinness Global Energy fund, told Reuters.
BP could also bump up its dividend by 4% or possibly more, according to HSBC analysts cited by Reuters.
The U.S. supermajors Exxon and Chevron could refrain from further upward targets on share repurchases after recently revising up their buyback plans.
After doubling Q1 earnings, Exxon announced at the end of April that it would triple its share repurchase program up to a total of $30 billion through 2023. Chevron, in early March, raised its share buyback guidance to $5 - $10 billion per year, up from prior guidance of $3 to $5 billion per year.
“With the increase in our dividend and buybacks in the middle of our updated guidance range, cash returned to shareholders is expected to grow more than 50% from last year,” Chevron’s CFO Pierre Breber said at the time.
The blockbuster earnings have already drawn the attention of policymakers.
The UK, home to Shell and BP, introduced a windfall tax of 25%, a new temporary 25% Energy Profits Levy for oil and gas companies, reflecting their extraordinary profits as oil and gas prices surged.
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In the United States, President Joe Biden continues to call out oil companies for their profits and to call on them to pass on to consumers the 20% drop in oil prices since mid-June.
“Exxon made more money than God this year,” President Biden said earlier this year.
By Tsvetana Paraskova for Oilprice.com
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