Japan’s SBI Adds XRP to Cryptocurrency Lending Service

0

Bloomberg

Big Oil sees money coming, but investors won’t get it yet

(Bloomberg) – After one of the most difficult years in the history of the oil industry, crude prices have recovered and major producers are finally generating cash. Investors really want to get their hands on it, but most will likely be disappointed, as the pandemic has created a legacy of debt for the world’s largest international oil companies, many of whom borrowed to fund their dividends when prices fell. Mobil Corp. and Total SE, which bore the financial pressure of maintaining payments to shareholders last year, any additional cash will go towards debt relief. Chevron Corp. and Royal Dutch Shell Plc have said they want to resume buyouts, but not yet. Only BP Plc is suspending the possibility that returns to shareholders will improve soon, after a year and a half of turnaround on its payments policy. First quarter results for the coming week should show a significant improvement in earnings and of cash flow after a disaster. 2020, but probably nothing that will change investors’ disenchantment with oil majors. “They have limited appeal as long-term investments because they cannot demonstrate that they can generate cash flow on a sustainable basis and return it on a sustainable basis,” said Christyan Malek, Head of Sector Oil & Gas EMEA at JPMorgan Chase & Co .. “The key is consistency. We haven’t had any. The first quarter will be an inflection point for the industry, according to JPMorgan. Company data and estimates compiled by Bloomberg show free cash flow – what’s left after operating expenses and investments – is expected to rebound to $ 80 billion for the five supermajors this year, from around $ 4 billion. By 2020, with around $ 22 billion, Exxon will total $ 19 billion and even the lowest-ranked BP will have around $ 11 billion. That will be enough for each of the five majors to cover their expected dividends for 2021 and together have more than $ 35 billion remaining. It is not known how much of this could end up in the pockets of shareholders. First quarter free cash flow will vary, ”said Will Hares, analyst at Bloomberg Intelligence. “BP has reached its debt target and should announce the resumption of buybacks. Shell announced a slight increase in the dividend, but it is unlikely to resume buybacks given its net debt target of $ 65 billion. BP buyouts After increasing its dividend by 2.4% in February 2020, then cutting the payout in half six months later, BP came under pressure to prove that it can deliver reliable returns to shareholders. The stock of the London-based company has been the worst performing of its peer group over the past 12 months. Even its CEO Bernard Looney acknowledged that investors were wondering if BP could pull off its reinvention for the low-carbon era. Earlier this month, BP managed to stand out from its peers in a positive way, signaling the clearer of imminent redemptions. The company said it hit its goal of reducing its net debt to $ 35 billion about a year ahead of schedule and will provide an update on the timing of share buybacks on Tuesday when the season opens. Big Oil results. improve shareholder returns. In August, BP had set its goal of returning 60% of excess cash to investors as the fifth priority after dividend financing, reducing net debt, shifting spending to low-carbon projects. and spending on basic oil and gas assets. Peers, whose stocks performed better last year, are not moving as fast. France Total, which was the only major oil company in the region to maintain its dividend last year, said any extra cash from rising oil prices will be used to reduce debt. Its next priority will be to increase investments in renewable energy to around 25% of its overall budget. Redemptions will only come after that. Shell announced a 4% increase in its dividend in October, after cutting the payment by two-thirds earlier in the year. Its goal is to reduce its net debt by $ 10 billion before returning additional money to shareholders. Banks such as Citigroup Inc. and HSBC Holdings Plc predict that this will not happen until 2022, as net debt rose in the last quarter of 2020 to $ 75 billion Unlike BP and Shell, the North American majors have been successful. through 2020 with their payments. intact, but at a high cost. Exxon’s debt jumped 40% during the pandemic to $ 73 billion, prompting Moody’s Investors Service to downgrade the company’s bonds twice in the past 12 months. losses. The company said it would maintain its annual dividend of $ 15 billion while paying off debt if oil and gas prices remain at current levels. JPMorgan sees Exxon’s free cash flow rebound to $ 19.6 billion this year, giving it a sizable surplus to reduce borrowing. Of the five supermajors, Chevron has the best track record and “good prospects” for a stock buyback, according to HSBC analyst Gordon Gray. The California-based company said in March it is expected to generate $ 25 billion in free cash on top of its dividend until 2025 if Brent stays at $ 60. As the pandemic unfolded last year, companies cut spending to the lowest combined level in 15 years, according to data compiled by Bloomberg Intelligence. The grip will continue this year, with investment spending only increasing slightly despite the recovery in oil. Chevron and Exxon have both blocked spending plans at drastically reduced levels until 2025. Total has slightly increased its capital budget for this year, as BP and Shell have set a hard cap on spending. If the combination of rising oil prices, lower spending, and asset sales results in increased cash flow that will help solve short-term supermajors’ problems, it could be. creating a long-term headache. Shell admitted earlier this month that it was not investing enough in new projects to offset the natural decline in production from its existing oil and gas fields. Bell. In the long run, “capex cuts, debt, and divestitures could do as much if not more harm than good, and none are truly sustainable.” For more articles like this, please visit us at bloomberg.com’s business news source. © 2021 Bloomberg LP

Leave A Reply

Your email address will not be published.