The top five Western oil and gas firms are prioritizing shareholder returns more than ever before, aiming to reassure investors amidst uncertainties surrounding fossil fuels.
According to Reuters, these companies, including BP, Chevron, Exxon Mobil, Shell, and TotalEnergies, returned over $111 billion to shareholders in 2023 through dividends and share repurchases, slightly surpassing the $110 billion returned in 2022.
This move comes as the sector faces challenges such as geopolitical turmoil, economic uncertainty, and environmental concerns.
“During a time of geopolitical turmoil and economic uncertainty, our objective remained unchanged: safely deliver higher returns and lower carbon,” Chevron CEO Mike Wirth told investors last Friday, emphasized the company’s commitment.
Traditionally, oil majors attracted investors, including pension funds, due to their reliable dividends. However, the rise of the tech sector, previous performance issues, and environmental awareness have diminished interest in the oil and gas sector.
The energy sector accounted for 4.4% of the overall weighting of the S&P 500 index by the end of January, down from around 14% in the last decade, according to S&P data.
Despite differing strategies among companies, such as focusing on oil production or investing in low-carbon initiatives, the message to investors remains consistent: the companies pledge to deliver returns.
Shell, Chevron, and TotalEnergies increased dividends, while BP escalated its share buyback rate. Exxon led the sector by returning $32 billion to shareholders in 2023.
Analysts highlight investors’ reluctance to invest in large-scale projects with uncertain returns amidst evolving demand trends. Companies are exercising greater financial discipline, with minimal spending increases expected in 2024.
This cautious approach reflects investors’ demands for returns and uncertainties in energy demand, emissions, and regulations. Consequently, the sector’s credit quality has improved, with more upgrades than downgrades in recent years, indicating a focus on maintaining balance sheet strength and flexibility.