Big Oil Needs to Borrow to Finance Own Share Buybacks
– Oil majors have been reporting lower Q3 profits, suggesting that the era of windfall revenues is coming to an end, with the average quarter-on-quarter dip for the five leading companies averaging 12%.
– ExxonMobil, Chevron, Shell, TotalEnergies, and BP will earn a combined $24.4 billion in Q3, which leaves all companies except Shell unable to cover their dividends and share buybacks with free cash flow.
– The need to borrow in order to cover buybacks isn’t necessarily a problem for US oil majors whose debt-to-capital ratios are well below historical averages, with ExxonMobil and Chevron posting 13.5% and 12.6%, respectively.
– BP, on the other hand, is on the other side of the spectrum, being the worst-performing Big Oil stock of the year with a 15% decline in 2024 alone as its debt-to-capital ratio stands at a whopping 44.4%.
Not Since Germany’s Reunification Was Its Energy Demand This Weak
– Germany’s energy consumption this year is set to drop to the lowest level since the two Germanies reunited in 1990 even though Europe’s leading economy avoided a technical recession in Q3.
– German energy demand is set to decline again by 1.7% year-over-year to 2,904 TWh produced, as manufacturing struggles to recover amidst rising natural gas prices (up 25% in 2024 so far) and subsequently higher power prices, too.