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Bloomberg
The world’s biggest oil companies are pumping out cash like crude’s at $100 a barrel again, and investors love it.
Exxon Mobil Corp, Royal Dutch Shell Plc, Chevron Corp and BP Plc smashed analysts’ earnings estimates for the fourth quarter, giving investors assurance that their dividends and buybacks are secure even with oil trading near $60.
Those companies together generated close to $43 billion of cash flow from operations, the highest in more than four years. They achieved this despite a deep slump in crude prices at the end of the year, maintaining returns by keeping a tight grip on spending and squeezing more out of projects at lower prices.
“The 12-month rolling cash flow continues to point upwards, and I think that’s what’s important,†said Oswald Clint, an analyst at Sanford C. Bernstein Ltd. “It isn’t just refining-led improvements, it isn’t just an upstream oil price, it’s widespread across the businesses.â€
The market rewarded the companies’ efforts. BP surged the most in almost three years after its profit beat even the most optimistic analyst estimate. Shell’s B shares gained 3.6 percent when it reported earnings on January 31, while Exxon and Chevron increased by a similar amount on February1. France’s Total SA, the fifth member of the oil-supermajor group, reports earnings February 7.
The group’s strong performance comes at a crucial time. They need to remain attractive for shareholders who stuck with them through a years-long downturn because of the reliability and size of their dividends. Shell’s cash payout of almost $15.7 billion was the largest in the world, besting its Big Oil rivals and other corporate giants such as Apple Inc. and AT&T Inc. Beyond the dividend, major oil companies need to demonstrate they can maintain share buybacks, increase production, and still invest to grow. Shell’s Chief Financial Officer Jessica Uhl said the company can “do it all.†BP can curb debt, repurchase shares and invest with oil at $50 a barrel, CFO Brian Gilvary said.