Why Exxon and Chevron shareholders aren’t phased by bumper profits

This article is an on-site version of the EnergySource newsletter. Sign up here Send newsletter directly to your inbox every Tuesday and Thursday

Two things to start: BP It raised its dividend and announced the repurchase of new shares.And two major Australian oil companies, Oil Search and Santos, merge..

Welcome to the energy source. I am writing from Calgary. Calgary will produce several reports over the next two weeks. (If you live in the city, please contact derek.brower @ ft.com)

I’ve made two transatlantic trips in the last five months and was amazed at how quickly things changed. When I flew to Chicago in April, Heathrow was a shadow of itself, and the Dreamliner I was riding was almost empty. When I was flying to Calgary via Skipole on Sunday, the airport was busy — unpleasant.Airline confidence return..

In today’s newsletter, Justin Jacobs looks back at the American Big Oil bumper quarter, which hasn’t impressed investors much, judging by stock performance since Friday’s earnings announcement. Our second note stays in the United States, where a large bipartisan infrastructure bill was announced. The text is 2,702 pages to stop the door. Still, it is only the first step in what can elicit the legislative process.

thank you for reading.

Where does Big Oil go from here?

ExxonMobil and Chevron made a profit in the second quarter of the bumper last week. The two US super-majors exceeded Wall Street’s expectations as a wide range of global economies reopened, spurring energy demand and price spikes.

But shareholders weren’t very impressed. There is no significant rise in stock prices due to the surge in profits, which is a sign that regaining investors remains a difficult battle. Where do they go from here? Three areas we are looking at:

1. Investors still want Big Oil to be a cash machine

Some good quarters haven’t undone the damage from last year’s crash. As a result, both supermajors still spend less than before the pandemic and resist the temptation to surge as oil prices rise.

It helped investors shift more cash and pulled shareholders back.

For now, Chevron is at the top. Both companies maintained stable dividends, but Chevron revived share buybacks, which have been a staple of selling big oil to investors over the last decade, faster than expected. BP did the same. Exxon continues to focus on paying back approximately $ 63 billion in net debt, which nearly doubled between late 2018 and the end of 2020.

Spending should be kept low as companies continue to adjust their balance sheets as they increase dividends and buy back shares. These direct payments will continue to be the biggest selling point for owning big oil, as the shift to cleaner fuels will cloud its high carbon business.

2. Environmental consideration remains a top priority

This was the first earnings round as both Exxon and Chevron suffered heavy climate-focused damage. Shareholder defeat Back in late May — that day Shake big oil..

Exxon has lost a tough proxy vote for the No. 1 small activist hedge fund engine, which has secured three seats on the oil giant’s board. Darren Woods of Exxon said the newly formed board had held one meeting so far, calling it “encouragement.”But he I don’t expect “Major changes in strategy”.

Nevertheless, it is clear that the company’s low-carbon focus, carbon capture and storage, is receiving more attention. Woods said he was looking forward to a final investment decision in two new CCS projects in Wyoming and Rotterdam next year, suggesting more in terms of low carbon.

Chevron was more shy about falling out of his shareholders’ climate change defeat. However, it announced the formation of a “new energy” business line — a small bureaucratic reorganization that moved efforts on top of the corporate structure. Chevron also made fun of the first “Energy Transition Spotlight” event in September this year.

3. Plastics in the pandemic era bring great benefits to big oils

All plastic ejectors, plates and cutlery used in the last 18 months have brought enormous benefits to super majors, along with the surge in demand for medical PPE equipment.

Exxon’s Woods said margins for polypropylene and polyethylene, two major inputs to consumer plastics, surged 140% compared to the fourth quarter of 2020.

It was the best quarter ever for Exxon’s chemical business, but Woods doesn’t consider it a one-off. When the big oil budget was under pressure, he said “going forward with many major chemicals and downstream projects” was a priority. (Justin Jacobs)

What is included in the bipartisan infrastructure bill?

Infrastructure Investment and Employment Law on page 2,702, now Debate in the US Senate, was Release on Sunday. This demands $ 550 billion in new spending on US infrastructure and represents the first major legislative attempt by the Biden administration to implement a radical overhaul plan for climate-friendly energy in the United States. What else do you know?

Senate Republicans May Make Amendments In this week’s discussion.But the bill is likely to pass, said majority leader Chuck Schumer, who supported it last week by some Republican senators. Not told yet Whether they support it in the final vote.

Clean energy and climate mitigation get some generous fundingIncludes $ 21.5 billion for the “Clean Energy Demonstration Office” and another $ 16 billion for energy efficiency.

But the bill isn’t radical energy, and climate bill campaigners want it.. Analysts at ClearView Energy Partners said the text was “fossil-friendly and a bit less migrating” than expected.

Traditional infrastructure Roads and bridges cost less than $ 40 billion for transportation, while new spending is about $ 110 billion. As expected, it does not include clean energy standards and electric vehicle tax credits. This has plagued some progressive Democrats. It is also far from the ambitious infrastructure overhaul needed to reach the decarbonization goals. According to analysts..

A dilapidated nuclear power plant gets help. Also, a line of support: fossil fuel areas facing transition, such as the West Virginia coal community— Democratic Senator Joe Manchin..

Manchin’s vote will be important What the Democratic Party is claiming as part of this first legislative effort. This is a $ 3.5 trillion package legislated through budget adjustments and is a process that allows a majority vote in the Senate. If Manchin is on board, voting on the party line will work for Democrats. There, clean electrical standards, subsidies for electric vehicles and renewable energies, and other major climate change can take concrete form.

But Some politics It’s still something to do. Major progressive Democrats argue that unless the Senate sends a more ambitious reconciliation package at the same time, they will not pass what they consider to be a much more moderate bipartisan bill. In short, the 2,700 pages presented in the Senate are just round. (Derek blower)

Data drill

State legislators have a pen on the energy bill.according to research In the first half of 2021, S & P Global signed more energy-related measures than the total for the last two years.

In the first two quarters of 2021, 13 Republican majority legislatures implemented measures to ban natural gas bans. Meanwhile, Japan’s first challenge to ban natural gas— Berkeley, California — soon I was fired.

Texas is one of the states that enacted the most energy-related legislation, followed by 17 legislations. Deep freeze During February. For example, in June Governor Gregory Abbott signed House Building 4492, which allows the Texas Electric Reliability Council to: Access $ 800 million Loans for debt, they couldn’t pay off after the February storm.

The state has also set clean energy targets. Earlier this year, Delaware passed a law to increase the state’s share of electricity sales from renewable sources to 40% by 2035. In March, Virginia will receive 30% of the electricity sold in the state from carbon-free resources by 2030 and 2040. The state wants to achieve net zero emissions by 2045. (Amandachu)

power point

  • Fossil fuel company Relax US environmental regulations..

  • China’s EV industry Challenge Europe and Japan..

  • Over 50 investors I want to vote About corporate climate change initiatives.

  • The United States and the United Kingdom Iran For a drone attack on an oil tanker.

  • “”Green floctionMay stop clean energy transitions.

  • Natural gas may become the “second pillar” of decarbonization, new people say IHS Markit research.. Replacing high-emission fuels such as coal and oil with natural gas reduces emissions per unit of electricity by 50%. And because the natural gas infrastructure is so diverse, you’re not tied to fossil fuels as you move towards it. The study found that pipelines, gas-fired power plants, liquefaction plants, and boilers could be reused to carry low-carbon gas.

  • How about EV change Roadside breakdown service. (Wired)

  • Two US solar companies schedule Petition the government to extend tariffs on imported solar panels. These tariffs mainly affect imports from companies owned by China. Link Forced labor in the national autonomous Xinjiang Uygur Autonomous Region. (WSJ and S & P)

Energy Source is a twice-weekly energy newsletter from the Financial Times.It has been written and edited by Derek Blower, Miles McCormick, Justin Jacobs When Emily Goldberg..

Recommended newsletter for you

Moral money — Our must-see newsletter on socially responsible business, sustainable finance and more. Sign up here

Corporate secret — A must read about the changing faces of international trade and globalization. Sign up here

Why Exxon and Chevron shareholders aren’t phased by bumper profits Source link Why Exxon and Chevron shareholders aren’t phased by bumper profits