The world's largest oil companies are flooded with cash, thanks to rising oil prices. But few, if anything, are spending, even when the prospect of a global oil shortage is looming.
Collectively, Exxon, Chevron, Shell and Total revenues were $ 16.8 billion, the highest since 2014. Exxon's net income increased 16% to $ 4.7 billion, but production fell 6% less of 4 million barrels per day. Chevron's profits rose 36% to $ 3.6 billion, while production increased 6.5% to the equivalent of 2.9 million barrels per day.
However, despite a 50% increase in prices since last year, the budgets According to the consultant Wood Mackenzie, large public companies are moving carefully because they are under pressure from investors after spending a lot in the last decade when prices were higher, only to generate disappointing returns.
"The new religion and confidence in the sector is, to say the least, fragile," said the Executive Director of Shell
Ben van Beurden.
"We will have to demonstrate a little more than we really want to say about the discipline of capital."
By contrast, the smallest shale producers in the US UU., Especially those backed by private capital, have seized the opportunity to increase drilling and gain market share.
Two years ago, the top 30 US companies represented almost 64% of production. That percentage has fallen to 60% this year, according to the Rystad Energy consultancy.
"Large companies continue to cut coupons to show they can live on their own," said Adam Flikerski, managing partner of BlackGold Capital Management LP, an asset manager specializing in oil and gas loans. "Like technology companies, smaller players are still rewarded for their growth."
The cautious response of the world's largest producers occurs when the global oil saturation that has affected the industry over the past four years seems to disappear. Without further spending on new oil production, warns the International Energy Agency, the world could move from abundance to shortages of supplies by 2020.
Lack of investment is "potentially accumulating problems for the future" , the headquarters in Paris The agency said last month.
Even so, many investors in publicly traded oil and gas producers are pressuring executives not to sow the seeds of another price drop with excessive growth. His apathy for the oil rally has proved.
While the price of Brent crude, the international oil reference index, has risen around 11% this year, a leading barometer of energy stocks, the MSCI World Energy Index, has only risen around 4% . Several companies have performed even worse. Exxon has fallen by 3.9%.
The pace of share buybacks has been a key factor for performance so far.
The shares rose 3% on Thursday after the company revealed that it had repurchased around $ 500 million in shares, as it reported quarterly earnings rose 52% to $ 888 million.
Exxon fell 3.4% on Friday after announcing that it has not yet re-established its program to buy back shares. Although the company recorded its largest cash flow since 2014, it has not yet met analysts' expectations. for the second consecutive quarter. Profits increased 16% to $ 4.65 billion compared to the first three months of last year, but production fell after an earthquake in Papua New Guinea knocked out natural gas production in the country. Revenues increased 16% to $ 68 billion.
Chevron shares rose 1.8% on Friday after the company's earnings exceeded expectations, and reported that revenues increased 13% to around $ 38 billion.
Shell's shares in the United Kingdom fell 0.7% after the company failed to meet cash flow expectations and gave no further clarity as to when it would start repurchasing $ 25 billion in shares, as it reported quarterly earnings They increased by two-thirds to almost $ 6 billion.
Chevron shares rose 1.8% on Friday after the company said first quarter earnings were $ 3.6 billion, 36% more than a year ago.
announced a dividend increase of 3.2% on Thursday. director
He said the company will use the excess cash it gets with oil above $ 70 a barrel to reward shareholders with higher dividends and share buybacks.
"Some of you may be concerned about financial discipline, but I can say that we keep the discipline in mind," Mr. Pouyanne told analysts.
Sanford C. Bernstein expects the world's largest oil companies to generate record amounts of excess cash from new investments this year.
Spending restrictions are not so restrictive that larger companies are completely avoiding new developments.
PLC, which reports earnings next week, sanctioned several new projects this month, including the second project in a $ 6 billion natural gas development in India.
Earlier this week, Shell announced plans for a new deepwater project in the Gulf of Mexico. Exxon can make a final investment decision later this year on a new facility to manufacture polypropylene, a widely used form of plastic.
One reason for caution among the larger companies is that some analysts, investors and executives still do not believe that oil prices remain high until the end of the year.
"There is potential weakness on the horizon in oil prices," said Tom Ellacott, senior vice president of corporate research at Wood Mackenzie. "It's still a very uncertain environment."
The smallest US producers UU They are exercising less caution, since many of them still have business models similar to those of startups. They must invest in new wells to test the viability of new prospects.
Those companies are one of the main reasons why forecasters say US oil production can reach 11 million barrels per day by the end of the year, surpassing production in Saudi Arabia.
In February, the companies that are not among the main producers of EE. UU They constituted almost half of the approved permits for new drilling, according to the data and analysis firm DrillingInfo. In the last six months, these operators accounted for approximately 42% of the permits. Permits are generally a useful barometer for future drilling activities.
Many of these companies will be affected by the shortage of labor and trucks, as well as bottlenecks in the Permian basin of West Texas and New Mexico, the heart of the US drilling activity. UU Those challenges could reduce production by around 400,000 barrels per day, but production will continue to grow as many companies have secured the supplies and contracts needed to meet their targets, said Artem Abramov, vice president of analytics firm Rystad.
We have a completely new generation of small and private players with very ambitious growth plans in the Permian Basin, "he said." Those plans will continue. "
Write to Bradley Olson at Bradley. Olson@wsj.com and Sarah Kent at email@example.com