The latest financial books of the world’s largest oil and gas companies have sweetened shareholder returns and further reassured investors of a more stable footing two years after Covid-19 first shook the oil market.
Global oil demand roared back in 2021, with gasoline and diesel use surging as consumers resumed travel and business activities amid the coronavirus pandemic, a dramatic shift from 2020 when the oil and gas industry endured a dreadful 12 months.
With global Brent crude averaging $71 per barrel ($71/b) in 2021, oil majors were able to maximise value from their fossil fuels operations and further boost investors’ confidence that their business model is well strengthened to fund other activities aligned with Paris Agreement targets.
Shell
The British oil major posted adjusted earnings of $19.29 billion for the full-year 2021. That compared with a profit of $4.85 billion the previous year. Analysts polled by Refinitiv had expected full-year 2021 net profit to come in at $17.8 billion.
Shell’s performance was driven by its integrated gas, renewables and energy solutions division, which generated more than 63 per cent of group earnings in the fourth quarter, which help pay down $4.9bn of borrowing in the fourth quarter, reducing net debt to $52.6bn compared with $75.4bn a year earlier.
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The company’s adjusted net income was $6.39 billion for the period, up from $393 million a year earlier and beating even the highest analyst estimate. Cash flow from operations was $8.2 billion, a reduction of almost 50% from the third quarter due to the movement of working capital and margin-call payments.
“The numbers look extremely solid” with “monster integrated gas earnings,” RBC Capital Markets analyst Biraj Borkhataria said in a note. Shell could end up surpassing the bank’s estimate for total buybacks of $11.5 billion this year, he said.
Shell CEO Ben van Beurden described 2021 as a “momentous year” for the company and said progress made in the last 12 months would enable the firm “to be bolder and move faster.”
ExxonMobil
ExxonMobil registered its highest profits since 2014, capitalising on strong oil and natural gas prices in a sharp reversal from the early months of the pandemic.
The US oil supermajor reported a net profit of $23bn in 2021 compared with a $22.4bn loss suffered as fuel demand collapsed in 2020.
The company’s fourth-quarter profit of $8.9bn easily beats Wall Street expectations of $8.4bn, according to estimates compiled by S&P Capital IQ.
Oil giant Chevron said it made $5.1 billion in the final three months of the year on revenue of $46 billion. The profit compared with a loss of $665 million for the period in 2020 on revenue of $25 billion.
The improved results were powered by oil prices that reached a seven-year high in late 2021 and have continued to rise to more than $80 a barrel.
For all of 2021, Chevron earned $15.6 billion compared with a loss of $5.5 billion in 2020, one of the most trying years for the industry in modern history as businesses and cities locked down and consumers stayed home.
Chevron executives say the slump, and the necessity for the company to cut expenses, ultimately made for a stronger business.
“We’re an even better company than we were just a few years ago,” said Mike Wirth, Chevron’s chief executive. “We’re more capital and cost-efficient, enabling us to return more cash to shareholders.”
Further breakdown showed Chevron’s upstream segment earnings totalled $2.97bn, compared with $101m a year earlier.
This surge is primarily attributed to higher gains on asset sales, increased sales volumes, and reduced exploration expense, the firm said.
The firm also reported $760m earnings in its downstream unit, rising from a loss of $338m in Q4 2020.
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