In the first half of this year, European and American oil giants made a lot of money.
Recently, BP, Shell, Total, Chevron and ExxonMobil announced their overall results for the second quarter. Financial report data shows that the total net profit of the above five oil giants in the second quarter was approximately US$59.3 billion (approximately RMB 400 billion).
The profits of many oil giants have hit new highs. In the second quarter, BP's profit hit a 14-year high, Shell has set a record profit for two consecutive quarters, and Chevron's net profit was four times that of the same period last year.
Everbright Futures Energy and Chemical Analyst Du Bingqin said in an interview with the First Financial Daily that as the global economy gradually recovers from the epidemic and the geopolitical conflict in the first half of this year pushes up oil prices, oil giants have performed well in financial reports. To maintain investor confidence, the above-mentioned companies need to significantly reduce their debt liabilities that have surged due to the epidemic and increase shareholder dividends. "Looking ahead to the third quarter, although oil and gas demand may decline, the supply side is still relatively tight, and there is certain support in the future, and the excess profits of oil companies are also expected to continue," she said.
shareholders are very happy
The above-mentioned oil giant said that the reason why profits hit record highs is mainly due to rising energy prices and cost reductions. Affected by geopolitical conflicts and recovery in demand, oil and gas prices reached the highest level in more than a decade in the second quarter, which pushed up profit margins for oil and gas production business.
The oil giant with huge profits first chooses to return to shareholders. Shell is currently launching a new $6 billion stock buyback program that will be completed before the third-quarter results are announced; Chevron raises the upper limit of this year's share buyback program to $15 billion, higher than the earlier $10 billion cap, and it has paid off some of its debts; BP said it will buy back another $3.5 billion in stock before the third-quarter results; ExxonMobil returned $7.6 billion to shareholders in the second quarter.
Ryan Todd, an analyst at Piper Sandler Companies of investment bank, said that the reason oil giants have returned large amounts of cash to shareholders is to rebuild the trust lost in 2020 due to unexpected dividend cuts. The oil and gas industry has cyclical attributes, and companies need to bring returns to investors throughout the cycle.
However, both government agencies and industry organizations have questioned the huge profits of European and American oil giants. US President Biden said Exxon Mobil has made too much money this year. Recently, UN Secretary-General Guterres called on governments to tax large oil and gas companies that have made huge profits from the current energy crisis. In his opinion, oil and gas companies have made record profits from the current energy crisis, while the poorest people and communities and the natural environment have paid a heavy price. Edmund King, president of the British Automobile Association, said BP should use profits to lower fuel prices.
In Du Bingqin's view, theoretically, imposing "high profit tax" on oil companies and urging them to increase production can indeed alleviate the cost of living pressure brought to residents by high oil prices to a certain extent. But in fact, the current highs of international oil prices are determined by multiple factors including geopolitical and structural supply and demand imbalances, and they fluctuate significantly. "Under this background, it may be left to see whether many countries can truly impose 'profit tax' on the energy industry to solve the problem of high oil prices," she said.
Faced with doubts, BP said there was no plan to lower fuel prices as the company would pay the government's energy profit tax announced in May to help reduce the cost of living.
The above company also said that there are about 1,200 BP brand gas stations in the UK, but it only operates 300 gas stations to set fuel prices. “On the sites where we control pricing, our goal is to develop competitive prices with local factors in mind, including competitors, at each site,” BP said.
And Total CEO Patrick Pouyanné said that in the context of the continued impact of geopolitical conflicts and the high oil and gas prices, the company has actively increased energy output and ensured energy supply.
Oil giants control monetary policy
Although profits hit record highs, the above-mentioned oil giant said it will stick to a relatively conservative spending plan in the oil field. Chevron said that although the company has increased its capital expenditure since 2020, its budget is still below its previous level; ExxonMobil maintains its forecast of full-year capital expenditure of $21 billion to $24 billion; Total's net investment plan this year will be $16 billion.
In Du Bingqin's view, the reason why oil giants are quite cautious about capital expenditure is, on the one hand, because the current expectations of interest rate hikes by European and American central banks such as the Federal Reserve have risen, which may suppress the economy and reduce oil and gas demand in the future, which may affect the revenue and profits of oil and gas.
"On the other hand, under the background of energy transformation, the proportion of traditional energy in the energy structure will gradually decline in the future. It is no longer feasible for energy giants to rely entirely on traditional fossil energy business. It is necessary to be cautious about the capital expenditure of future upstream projects and avoid excessive pursuit of rapid production growth." She further analyzed that this requires gradually eliminating backward old refineries mainly based on traditional oil products, increasing further exploration and development of high-quality upstream resources, and maintaining stable cash flow and dividends. ”
Shell CEO Ben van Beurden also admitted: “With the turmoil in the energy market and the continued action to deal with climate change, 2022 will continue to face huge challenges. "
As of the 4th, the price of gasoline in the United States has fallen for 50 consecutive days. Data from energy data and analysis company OPIS shows that on the 3rd, the average price of ordinary unleaded gasoline fell to $4.16 per gallon, a 17% drop from the previous high of $5.02 per gallon set on June 14. Patrick De Haan, head of oil analysis at GasBuddy, market research firm, believes that the price of gasoline in the United States has peaked in June. "If nothing goes wrong, the average price of gasoline in the United States may drop below $4 per gallon in October, November and December. "He said.
Data from US investment banks Tudor, Pickering, and HoltCo show that the average refining profit margins of gasoline and diesel in the United States have recently declined by 47% and 25% from the second quarter respectively.
However, in Du Bingqin's view, although there may be a slowdown in the future, due to the limited ability and willingness of suppliers to increase production, and the limited output growth of US shale oil companies due to capital discipline, it is expected that the supply and demand of the global crude oil market will remain tightly balanced in the third quarter. "This means that under this background, there is certain support for oil prices, and the excess profits of oil companies are expected to continue. "She said.
