LONDON (Realist English). The world’s biggest oil companies are being forced to make difficult financial choices as falling crude prices put an end to years of record profits and threaten the massive shareholder payouts that defined the post-Ukraine boom.
U.S. and European energy giants — including ExxonMobil, Chevron, Shell, BP and TotalEnergies — have begun cutting jobs and slashing costs, signaling a sharp turn from the exuberance of 2022, when soaring fossil fuel prices delivered combined profits of nearly $200 billion.
Flush with cash at the time, the so-called “supermajors” used their windfall to reward investors through aggressive dividends and buybacks, a practice U.N. Secretary-General António Guterres denounced as driven by “monster profits.”
Today, those policies are under strain. With Brent crude now trading near $63 a barrel, analysts warn that maintaining such payouts could push companies toward unsustainable debt levels.
“The environment has completely changed,” said Maurizio Carulli, global energy analyst at Quilter Cheviot. “Shareholder distributions at 50% of cash flow from operations are simply not viable when prices stay low.”
From buybacks to belt-tightening
In April, BP slashed its buyback program from $1.75 billion to $750 million after weak quarterly results, while TotalEnergies recently said it would slow the pace of repurchases “to retain room to maneuver” amid geopolitical and economic uncertainty.
“These are sensible moves,” Carulli said. “We’ll likely see others follow.”
S&P Global Ratings executive Thomas Watters warned that oil prices could fall into the $50 range next year as OPEC restores spare capacity and global inventories rise. “Companies will respond by cutting costs and capital spending wherever possible,” he told CNBC.
Avoiding a dividend shock
For now, most energy majors are reluctant to touch their dividends — the core of investor confidence.
“Buybacks are gravy, but dividends are the meat,” said Clark Williams-Derry of the Institute for Energy Economics and Financial Analysis (IEEFA). “Cutting buybacks is the easiest option. A dividend cut would send shivers through Wall Street.”
Earlier this year, Saudi Aramco stunned markets by reducing the world’s largest dividend, a move that triggered a decline in its share price and raised fears of contagion across the industry.
Searching for balance
Analysts say oil executives now face three unappealing choices: borrow to sustain payouts, scale back buybacks to preserve balance sheets, or cut investment — risking weaker future output.
“Whatever they choose, some investors will be unhappy,” Williams-Derry said.
Despite this, the downturn has so far been milder than many expected. Peter Low, co-head of energy research at Rothschild & Co Redburn, noted that oil prices have shown “surprising resilience” since President Donald Trump’s tariffs in April initially sparked fears of oversupply.
“The question now is whether companies can maintain their payout policies into the fourth quarter if prices stay weak,” Low said. “That’s when we’ll see if this new discipline holds.”
TotalEnergies and Shell are set to report third-quarter results on Oct. 30, followed by ExxonMobil and Chevron on Oct. 31, and BP on Nov. 4 — with investors bracing for a reality check on Big Oil’s next chapter.
