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2 November 2022

Oil majors Q3 – enjoy profits, promise dividends, reinvestment

Earnings season has brought oil companies back into public scrutiny as Shell, BP, Exxon, TotalEnergies, and Chevron all record bumper results while war rages in Ukraine, totaling almost $50 billion in profit.

BP declared $8.2 billion in net profit for the 3 months ending September, up from $3.3 billion in the same period a year earlier. BP will currently pay $800 million in windfall taxes to the UK government as a result of its operations in the North Sea, but as with last quarter, fresh calls are being made asking if this is enough.

Speaking at the ADIPEC conference in the UAE on Monday, BP’s CEO Bernard Looney said how it was the company’s job to pay taxes and to invest, seemingly accepting the windfall tax as an inevitability and trying to sound good about it.

This quarter BP has invested in Archaea Energy, a leading renewable natural gas producer, and has made numerous other investments in the EV charging sector including a partnership with Hertz.

Further announcements include that the company would be spending $2.5 billion of this profit for stock buybacks, something slightly tone-deaf considering the circumstances, but certainly something its shareholders expect.

Shell on the other hand reported $9.5 billion in profit in Q3 this year, but it failed to meet expectations which were set at $10.5 billion for the quarter. Shell’s net earnings in Q2 were $11.5 billion, this breaks the company’s streak of record-breaking profit each quarter following the first half of this year.

Unlike BP, Shell will not be paying any windfall taxes to the UK government despite being listed on the London Stock Exchange. This is because it is making significant investments in its North Sea footprint.

Shell CEO, Ben van Beurden, who is resigning from his position at the end of the year, said that oil companies shouldn’t be surprised by special levies introduced by local authorities to fund transfers to those who need it most in these very difficult times. Admittedly I’d imagine it’s much easier to say when you’ve not got to deal with it in a couple months.

Subject to board approval, Shell is also looking to increase its dividend by 15%, which would take effect in March of next year.

ExxonMobil enjoyed a net income of $19.6 billion in Q3 of 2022, nearly tripling its profit in comparison with a year earlier, which sat at $6.7 billion. Exxon has been considerably less receptive to the idea of a windfall tax, CEO Darren Woods argued that commodity export bans or a windfall tax would significantly disadvantage the industry and serve only to solve short term political problems. He also warned that it would carry significant long-term consequences, which of course is not true.

Leave it to Exxon to bring out the thinly veiled threats and accusations of politically influenced decisions when it’s profiting directly from war in a foreign continent and the suffering of millions.

Woods went on to say how Exxon has raised its quarterly dividend by 3% on the back of these results, claiming to be doing its part in “returning its profits back to the American people”. The man’s commitment to willful ignorance is almost commendable.

Exxon’s main US rival Chevron posted quarterly profits of $11.2 billion for Q3 of this year, nearly double Q3 of last year which was just $6.1 billion, and also about 20% above expectations. This was largely attributed to the war in Ukraine and increases in production at its oil fields within the US.

Much of this profit came from increased output from the largest US oil field, the Permian Basin. Output from the basin is up 12% compared to a year ago.

Back across the pond in France, TotalEnergies reported an adjusted net income of $9.9 billion, and when taking into account a new impairment related to Russia of $3.1 billion, an IFRS net income of $6.6 billion for the quarter. This represents an increase of just 43% compared to this time last year when accounting for the Russian impairment, or about 110% including it.

The company also made significant investment into both its renewable energy portfolio and its fossil fuel portfolio. These include but are not limited to the startup of Seagreen, Scotland’s largest offshore wind farm, reaching a total of 500MW of distributed solar capacity worldwide, and launching the Fenix offshore gas project in Argentina. A full list can be found here.

TotalEnergies has also reduced its fuel prices until the end of the year, where a 20 cent per liter reduction will be in place at TotalEnergies service stations in France until the 15th of November, reducing to 10 cents per liter until the end of the year.