Big Oil Is Raking in Cash So Investors are Asking: Now What?

[Elderberry]

Bloomberg By Kelly Gilblom and Kevin Crowley 7/24/2018


    Largest 9 companies to have $8 billion surplus cash in 2Q: RBC
    Investors are urging companies to return cash through buybacks

The dark storm clouds that have been hanging over the oil industry during the crude-price slump have suddenly started raining cash.

After cutting billions of dollars of costs to survive the biggest downturn in decades, Big Oil is now riding a price rebound to generate enough cash to pay dividends and still have plenty left over. The big question is what they’re going to do with it.

Company bosses are at a crossroads. On the one hand, investors who stuck around during the price collapse want to see money returned through share buybacks. On the other, CEOs still have an eye on growth -- either through investments, acquisitions, or both. On either path, they would still have to maintain hard-earned discipline on spending.

“Rolling back a year ago, the narrative was around the sustainability of dividends. Now it’s about shareholder returns in excess of those dividends,” said Ryan Kauppila, a Boston-based fund manager at Putnam Investments, which manages $172 billion. “The market is still very focused on capital discipline. That doesn’t mean don’t spend, it means spend it well.”

Investors will be listening keenly as Big Oil’s second-quarter earnings roll in starting July 26, when Royal Dutch Shell Plc, Total SA, Equinor ASA and Repsol SA report. Exxon Mobil Corp., Chevron Corp. and Eni SpA announce the next day, and BP Plc on July 31.

More: https://www.bloomberg.com/news/articles/2018-07-24/big-oil-is-raking-in-cash-and-investors-are-asking-now-what

[IsailedawayfromFR]

I had to laugh at this one as people have been telling me that since I got out of Petroleum Engineering School 45 years ago.

This could be influencing decision-making, and mega fossil-fuel projects or expensive exploration are unlikely to find favor right now, according to Alasdair McKinnon, fund manager at Scottish Investment Trust Plc, which owns Shell shares.

“A lot of people will be out there saying oil companies are doomed on a 10-year view,” he said. “They are dinosaurs, and there’s going to be some magical new energy in 10 years that will replace oil and gas.”