BP became the last major European integrated oil and gas company to report results for the first half of 2023 on August 1, a recent Moody’s Investors Service report highlighted, adding that the company’s adjusted EBITDA fell 24 percent compared with the first half of 2022.
BP’s results correspond to the performance of other European integrated oil and gas companies for the period, Moody’s noted in the report, highlighting that TotalEnergies and Eni “experienced declines of around 20 percent to 30 percent compared with the same period last year”. The Moody’s report stated that Shell’s EBITDA for the same period fell “at a somewhat lower rate of 15 percent”.
“Despite meaningfully lower earnings, however, sector credit quality remains strong, reflecting improved credit ratios and net debt levels over the past five years,” Moody’s stated in the report.
“Sound operating performance, combined with conservative balance sheets, is allowing companies to continue to buy back shares and raise dividends without dampening credit quality,” the report added.
“We expect sector earnings to continue to normalize at high levels in 2023, with oil prices remaining above the upper end of our medium-term oil price range of $55-$75 per barrel,” it continued.
In the report, Moody’s said a number of companies have adapted their strategies to increase their investments in existing and prospective production of hydrocarbons, particularly gas, “following the spike in oil and gas prices and the loss of most pipeline gas imports from Russia in 2022, alongside continued strong investment in renewable energy, biofuels and other non-carbon businesses”.
“Eni, for example, has increased capital spending in its upstream business by around 15 percent for 2023-26, and expects to grow production of 1,610 kboe/d in 2022 by three to four percent annually, with a focus on gas,” Moody’s noted.
“TotalEnergies, meanwhile, aims to grow oil production until 2030 and has increased its total capital spending budget from an average of $14 billion over the past five years to between $16-$18 billion for 2023 to accelerate oil and gas production, as well as investments in low-carbon energies,” it added.
Moody’s stated in the report that Shell, TotalEnergies, BP, and Eni will benefit from greater demand for LNG from Europe and Asia “given their leading positions in the global LNG trade and large gas production footprint”.
“All four companies will continue to invest significantly in new gas production and trading capabilities in the coming years to benefit from growing LNG demand globally and replace lost Russian pipeline gas imports to Europe,” the company added.
CEO Comments
In its latest financial results statement, BP CEO Bernard Looney described Q2 as “another quarter of performing while transforming”.
“Our underlying performance was resilient with good cash delivery – during a period of significant turnaround activity and weaker margins in our refining business,” Looney said in the statement.
“We’re delivering our strategy at pace – we’ve started up two major oil and gas projects to help keep energy flowing today and we’re accelerating our transformation through our five transition growth engines. And we’re delivering for shareholders growing our dividend and announcing a further share buyback,” he added.
“This reflects confidence in our performance and the outlook for cash flow, as well as continued progress reducing our share count,” Looney continued.
In a statement included in TotalEnergies’ latest results publication, the company’s CEO, Patrick Pouyanne, said, “in a favorable but softening oil and gas environment, TotalEnergies once again delivered this quarter robust results, strong cashflow, and attractive shareholder distribution”.
In Eni’s latest results statement, the company’s CEO, Claudio Descalzi, said Eni had delivered “excellent” operating and financial results in the second quarter “despite a less supportive environment”.
“This resilience is significant after having successfully captured upside in the previous stronger scenario. Furthermore, alongside the results delivery Eni has also made considerable steps forward in advancing strategy across the business,” Descalzi added in the statement.
“Considering our first half results and continuing business performance that drives raised guidance, we have a solid position from which to pay our first quarterly installment of the raised EUR 0.94 ($1.03) per share 2023 dividend in September and continue our EUR 2.2 billion ($2.4 billion) buyback which commenced in May,” he continued.
Shell CEO Wael Sawan said in the company’s most recent results statement that the business “delivered strong operational performance and cash flows in the second quarter, despite a lower commodity price environment”.
“Today we are delivering on our capital markets day commitment of a 15 percent dividend increase. We are going further on our buyback guidance by commencing a $3 billion program for the next three months and, subject to board approval, at least $2.5 billion at the Q3 2023 results,” he added.
“As we deliver more value with less emissions, we will continue to prioritize share buybacks, given the value that our shares represent,” Sawan continued.
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