The world’s biggest oil companies are locked in a contest to lure investors with promises of growth and greater rewards, with austerity far behind them.
Royal Dutch Shell and Total are emerging as frontrunners after a three-year slump thanks to strong growth projections but Exxon Mobil, the biggest publicly traded oil company, has largely disappointed with a weaker outlook.
Major oil companies slashed spending and cut costs after oil prices collapsed in 2014 and can now generate as much cash with crude at $50-$55 a barrel as they did when the price was around $100 earlier in the decade.
Cash flow at oil companies in 2017 rose to its highest since before the slump, helped by the drastic cost cutting plans and a recovery in oil prices, and executives are once again turning their attention to growth.
With crude expected to hold above $60 a barrel into the end of the decade, major oil companies are confident they can boost already attractive payouts to shareholders.
Total sent the strongest signal, announcing plans to increase dividends by 10 percent, buy back $5 billion of shares by 2020 and abolish its so-called scrip policy introduced in the lean years of offering shares instead of cash dividends.
Analysts at Bernstein hailed the French company, which reported a 28 percent rise in fourth-quarter profit on Thursday, as “the new benchmark in shareholder returns” and upgraded their share recommendation to “outperform”.
“Clearly the U.S companies disappointed more whereas Total cheered everyone up together with Shell, even if it had a small miss,” said Alasdair McKinnon, portfolio manager at The Scottish Investment Trust.
Norway’s Statoil and U.S. company Chevron Corp. have also raised their dividends over the past week, while BP was ahead of the pack by resuming share buybacks in the fourth quarter of 2017.
Shell, whose profits and cash flow beat Exxon’s last year, is now set to buy $25 billion of shares by the end of the decade after abolishing its scrip policy in November.
Analysts say Exxon remains an outlier after a disappointing drop in cash flow and production in the fourth quarter raised concerns among investors about its strategy.
Shares of the Irving, Texas-based company have fallen by more than 10 percent over the past week, wiping $35 billion off its value. Its stock has trailed rivals significantly over the past two years, reflecting its weaker outlook.
“All the majors are cheap at the moment but maybe Exxon is not the best major out there. We prefer Shell,” McKinnon said.
Shell’s shares have outperformed rivals with total shareholder returns of 90 percent over the past two years, said Simon Gergel, chief investment officer for UK equities at Allianz Global Investors,Reuters reports.
