View of the logo of the French oil giant Total in front of the Donges oil refinery
by Ron Bousso
After more than two years of considerable profits, the world’s largest oil companies may struggle to maintain the level of dividends and share buybacks in the face of falling oil prices, analysts say.
For decades, the oil majors have seduced investors by promising regular dividends, but uncertainty is growing about the long-term prospects of the industry in the context of the energy transition.
BP, Chevron, Exxon Mobil, Shell and TotalEnergies have paid more than $272 billion (€245.60 billion) to their investors in the form of dividends or share buybacks since the start of 2022, when prices energy surged after Russia’s invasion of Ukraine.
According to Reuters calculations, this figure represents almost double the dividends paid in the previous 10 quarters.
However, the recent drop in crude prices to around $70 per barrel as well as the sharp decline in refining profits are expected to weigh on results for the coming quarters.
In recent weeks, several banks have lowered their oil price forecasts, citing a gloomy outlook for demand, and lowered their earnings expectations for the sector as a whole.
“With oil prices moderating and refining margins weak, 2025 could be seen as a ‘lost’ year for the sector,” said Biraj Borkhataria, an analyst at RBC Capital.
According to him, Exxon, Chevron, Shell and TotalEnergies should keep their share buyback plans at the same level for the coming year, even if they have to borrow to do so.
To this end, according to RBC’s oil price forecast, Chevron would have to borrow $8.6 billion, Exxon $5.1 billion, TotalEnergies $5.6 billion, Shell $3.8 billion and BP $3.1 billion, he said.
BP will, however, likely slow down the pace of its share buybacks due to its higher debt level compared to its rivals, notes the analyst. For Italy’s Eni, the level of return to shareholders will depend on the scale of asset sales, he added.
“The difference in your ability to maintain distributions depends on the strength of your balance sheet today and your willingness to re-leverage to maintain distributions,” observes Biraj Borkhataria.
UBS analyst Joshua Stone expects BP to reduce its share buybacks to $4 billion in 2025 from $7 billion this year, based on an average crude price of $75 a barrel .
Shell should lower its buybacks from $1.5 billion to $12.5 billion while TotalEnergies should be able to maintain its buybacks at $8 billion, estimates Joshua Stone.
“Buybacks are likely to slow more significantly if prices fall below $70 a barrel,” he warns.
A BP spokesperson said the group’s expectations for shareholder returns remained unchanged and the company would maintain a disciplined financial framework.
Chevron, Exxon, Shell and TotalEnergies, which is holding an investor day in New York on Wednesday, did not immediately comment.
(Written by Ron Bousso and Gary McWilliams, French version Pauline Foret, edited by Blandine Hénault)
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