$113.8 billion! The five major oil giants set a new record for shareholder cash returns in 2023.
In 2023, Exxon Mobil, Chevron, Shell, Total, and BP p.l.c., the five major oil giants, returned a record-breaking $113.8 billion in cash to shareholders for dividends and stock buybacks, despite the sharp drop in oil prices. These oil companies reduced spending on major development projects to free up cash for dividends and buybacks, but investors were not convinced. The cash flow of the oil industry is considered cyclical and threatened by global transformation. The five major oil giants stated that as long as commodity prices remain healthy, they may return even more cash to shareholders this year.
According to Zhitong App, major oil giants are returning more cash to shareholders in 2023 than ever before, as their management teams control spending on new projects to free up cash for dividends and stock buybacks. Data shows that Exxon Mobil, Chevron, Shell, TotalEnergies, and BP p.l.c. spent a record-breaking $113.8 billion on dividends and stock buybacks in 2023, despite a significant drop in crude oil prices, an increase of over 10% from the previous year. It is worth mentioning that the global energy market was in turmoil in 2022 due to the Russia-Ukraine conflict, leading to a substantial increase in profits for the oil industry.
The cash return in the oil industry in 2023 was 76% higher than the average level during the industry's peak period from 2011 to 2014, when crude oil prices hovered above $100 per barrel, and large oil companies dominated major stock indices.
CEOs of oil companies are actively expanding their stock buyback programs to revive stock valuations that are currently below the market by 40% or even more. Since the pandemic, these oil companies have reduced spending on major development projects, partly due to concerns about oversupply in the market and to free up cash for dividends and stock buybacks.
However, so far, investors seem unconvinced. The valuation of oil stocks is only half that of large tech stocks. Investors generally believe that the cash flow in the oil industry is cyclical, overly dependent on OPEC's decisions, and threatened by the global trend of transitioning away from fossil fuels.
The major oil companies are trying to persuade investors. Executives of the aforementioned five oil giants have all stated that they may return more cash to shareholders this year as long as commodity prices remain healthy.
