Recently, several oil and gas giants have released the fourth quarter of 2022 and the annual report of 2022. Among them, the five oil and gas giants, ExxonMobil, Chevron, Shell, Total Energy and BP, earned nearly $200 billion in high profits last year. For oil giants, this is a new profit record. For 2023, market participants said that as investors’ concerns about the global economic slowdown, the collapse of natural gas prices, high inflation and other uncertainties rose, the profits of oil and gas companies in 2023 could not exceed that of 2022, but they would still obtain high profits. In addition, under the tide of environmental protection, despite the record annual profit of oil and gas giants, their capital expenditure continues to shrink.
Oil and gas giants make a lot of money
Recently, oil and gas giants took the opportunity of high oil prices to reap record high profits last year, and again announced a large dividend payout and stock repurchase plan.
On January 27, Chevron announced its operating results for the fourth quarter and the whole year of 2022. According to the performance report released by the company, Chevron achieved a revenue of 235.7 billion US dollars in 2022, an increase of 51.48% over the previous year; The net profit was USD 35.5 billion, an increase of 127% over the previous year. This level is about 1/3 higher than the company’s record performance in 2011. This strong growth is mainly driven by the company’s upstream oil and gas business. Chevron immediately announced that it would implement a US $75 billion share repurchase and would raise its dividend for the 36th consecutive quarter.
On January 31, ExxonMobil announced its financial results. In 2022, the company recorded a net profit of US $55.7 billion, an increase of 142% over the previous year, far exceeding the net profit of US $45.2 billion achieved under the high oil price in 2008, setting a new record for the company’s annual profit. In addition, the company achieved a quarterly profit of $12.75 billion in the fourth quarter of 2022.
On February 2, Shell released a financial report showing that in 2022, Shell’s adjusted net profit reached 39.870 billion US dollars, an increase of 107% over 2021, and broke the record of 28.4 billion US dollars set in 2008. The company’s adjusted earnings per share was $5.43, compared with $2.49 in the same period of the previous year. At the same time, Shell’s adjusted net profit in the fourth quarter of last year was US $9.814 billion, far exceeding the US $7.97 billion generally expected by analysts, up 54% year on year.
On February 8, Total Energy released its 2022 financial report. According to the data, in 2022, the company’s adjusted net profit reached a record $36.2 billion, twice the level of the same period of the previous year. In addition, BP’s financial report released on February 7 showed that the company’s net profit reached 27.7 billion US dollars last year, breaking the record of the company’s highest profit. The total net profit of the five oil and gas companies is about US $19.9 billion.
Optimistic profit outlook in 2023
For 2023, market participants believe that due to the decline of commodity prices, especially oil and gas prices, the profits of oil and gas giants in 2023 should not reach the level of 2022. However, market participants also said that the oil and gas giants in 2023 will still be very profitable.
Kim Fusier, head of European oil and gas research at HSBC, said: “Compared with the record level experienced in 2022, commodity prices have fallen across the board, but it seems that this year will still be a very strong year. In terms of the overall dividend distribution and share repurchase scale, this year is likely to be the ‘second best year in history’.”
Market participants believe that although the current oil price is far lower than the price in the first half of 2022, this may help put the global economy and energy companies on a more stable long-term growth track. Since the outbreak of the Russian-Uzbekistan conflict on February 24, 2022, the price of crude oil has fallen by 11%, but the share prices of the five major oil and gas giants have risen sharply. Market participants also pointed out that in 2022, the top 10 companies in the S&P 500 Index were energy companies, and ExxonMobil’s share price rose by about 80%, which was the best year in statistics. This will help oil and gas enterprises to obtain investment.
Industry giants are still controlling expenditure
Although it has created the highest profit in history, at present, the major oil and gas giants are still controlling expenditure and concentrating on returning profits to shareholders. This is inseparable from the current economic and environmental situation.
Although the annual profits of oil and gas giants soared, the profits of Chevron, Shell, Total Energy and other enterprises in the fourth quarter of last year did not meet investors’ expectations. This is a reflection of the global economic difficulties since the fourth quarter of 2022. At present, the market generally expects that the international market in 2023 will be difficult. Some analysts said that the strong business performance will help the oil and gas giants reduce the debt scale to about US $100 billion and make adequate preparation for any possible economic downturn.
Under the current economic situation, enterprises also tend to control capital expenditure. An executive of Chevron said that due to the occurrence of geopolitical events, the global energy supply was squeezed, and the company was not sure what would happen in 2023, but the market seemed to be stabilizing. Similarly, investors are also eager to hear executives continue to control capital expenditure. For the most part of the past 10 years, the huge increase in expenditure has eroded shareholder returns. All five companies said that the priority in 2023 is to give back to shareholders.
At present, both ExxonMobil and Chevron have raised their total expenditure targets for 2023, but market participants believe that these increases are mainly driven by inflation rather than long-term growth projects. Goldman Sachs said in a recent report that although the oil price rose by 500% from the beginning of 2020 to the middle of 2022, the real capital expenditure of global oil and gas fell.