Oil majors post record earnings in Q2 but green investments slow

Largely driven by oil and gas prices surged and refining margins, Major oil companies reported record profits in the second quarter, funnelling cash back to investors and strengthening their balance sheets, however, new findings show they are pledging little to green investments.

ExxonMobil, Chevron and Shell posted a combined $46 billion in earnings for the second quarter, according to earnings statements from the three companies. Exxon reported $17.9 billion in earnings, Chevron said it earned $11.6 billion.

The London-based Shell said it earned $16.7 billion when the cost of supplies is factored in. Its adjusted earnings for the quarter, which exclude certain price changes and one-time expenses, was $11.5 billion.

ExxonMobil and Chevron’s share prices are now just a few dollars short of their year-to-date highs, as the companies promised to increase stock buybacks and pay down debt, actions designed to reward shareholders.

Experts say European supermajors are still investing only a fraction of their capital on renewable energy despite pledging to become green businesses over the next three decades.

Shell chief executive Ben van Beurden told the Financial Times he had been holding back from big deals to give Shell more time to better understand the renewables sector.

“At some point in time, I would expect there to be a time for large, inorganic [growth], but you don’t want to start if you are a relative newcomer on the block,” he said. “We’ve been looking at a lot of large things before that didn’t work out, or that we didn’t decide to do . . . and today I’m congratulating myself for not having done it.”

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If Shell were to make a big move, he added, the number of power customers the target company had would be more important than the number of power assets.

Others in the industry point to a lack of viable targets for a blockbuster acquisition.

“Yes, it makes sense but there’s no obvious deal to done,” said one senior investment banker. “There are not that many targets that would be really transformative.”

Total has been the most active of the supermajors in striking deals. The French group made roughly $6bn in low-carbon investments between 2010 and 2020, the same as BP and Shell combined, according to Bernstein analysts.

Investment bank RBC Capital Markets values Total’s low-carbon business at $35bn, compared with $24bn for Shell’s and only $12bn for BP’s.

Bankers say Total has been more willing than its competitors to pursue partnerships with renewables companies rather than outright acquisitions.

Last year it bought a 20 per cent stake in Adani Green Energy for $2.5bn at an almost 40 per cent discount to the Indian group’s market capitalisation.

“That to me is what smart M&A looks like for an energy major going forward,” Peterkin said.

Worldwide oil output has been held back by a slow return of barrels to the market from the Organization of the Petroleum Exporting Countries and allies, including Russia, as well as labor and equipment shortages hampering a swifter increase in supply in places like the United States.

Exxon earlier this year more than doubled its projected buyback program to $30 billion through 2022 and 2023. Shell said it would buy back $6 billion in shares in the current quarter, while Chevron boosted its annual buyback plans to a range of $10 billion to $15 billion, up from $5 billion to $10 billion.