Big Oil Puts Debt Reduction Ahead of New Investments
OilPrice.com · Irina Slav ·
Despite record profits, oil majors are prioritizing debt reduction, share buybacks and financial discipline rather than launching major new investment programs.
The world’s biggest oil and gas companies have posted another strong quarter, with just Europe’s top six majors booking a collective $38 billion for the July-to-September quarter. Adding Exxon and Chevron, the figure swells considerably. But the supermajors are in no rush to start spending that windfall.
The oil and gas industry is having the exact opposite year to 2020. The war between the United States and Israel, and Iran has pushed oil and gas prices to the highest in years. The war between Russia and Ukraine, meanwhile, has driven refining margins to all-time highs, adding to refining disruption in the Middle East. The combination of developments has driven Exxon’s third-quarter profit up twofold from a year ago, Chevron has booked triple the profit it booked for last year’s third quarter, and BP has reported its highest quarterly profit in its long history.
Normally, with these formidable profits, Big Oil should be looking for ways to spend it. Analysts call it a supercycle, and supercycles drive super investments. Not this time, however. This time, Big Oil appears to be focusing on paying down debt, repurchasing stock, and being picky about new investments. Indeed, BP even suspended its share buyback program to cut debt faster—and it has, slashing the total by as much as $10 billion, with the remaining pile now at $13.9 billion. Big Oil appears to be approaching its strong year with a sober mind.
Read the full story at OilPrice.com · All coverage of this story