Oil majors are expected to report profit jumps of 84% to 158% for the third quarter. Yet they are likely to use the cash to pay down debt and fund shareholder returns rather than launch a spending spree.
Big Oil is heading for another strong quarter, with third-quarter profits expected to surge by 84%–158% across major energy companies. The question now is what the supermajors do with the money, and the answer probably is not a spending spree.
Profit forecasts for the majors
Reuters predicted that Shell could report an 84% increase in earnings from last year, with the figure at 155% for BP, 111% for TotalEnergies and 101% for Exxon. Chevron is seen booking the biggest increase, at 158%, based on LSEG data.
In dollar terms, Exxon is projected to earn $16.2 billion in the third quarter. Shell's profits are estimated at $10 billion, Chevron is expected to report $9.3 billion, and TotalEnergies' result is seen at $8.4 billion. BP's $5.6 billion is the lowest of the group.
Debt and buybacks come first
However, the companies are unlikely to throw those billions at every project that catches their eye. Reuters noted that the supermajors are using windfall profits to pay down debt, naming Exxon and Chevron as examples.
Shell plans to continue its share buyback, absorbing another $3.5 billion during the final quarter of the year. BP, in turn, is paying down its debt: its net debt-to-operating cash ratio stood at x1.7 at the end of last year, and the aim is to bring it down to x0.8. Chevron has cut its ratio from x1 to x0.4 in the current quarter. Debt reduction sits alongside dividend payments and buybacks in the majors' priorities.
Exploration still gets funding
Balance sheets are not the only destination for the cash. Many currently producing fields face natural depletion, so Big Oil is also spending on exploration, according to the article.
The war-related disruption has shifted investment flows, with more money going into exploration in South America and Southeast Asia, as Eni's chief executive Claudio Descalzi noted earlier in the year. Even so, Big Oil is going to keep being careful with its money, however many records its profits break.
Source: Oilprice.com
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