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Big Oil Gets Cash, But Will take Time to Reach Investors

Crude prices have improved after one of the most challenging years in the Oil industry’s history, and major producers are now producing surplus cash. Investors are eager to get their hands on it, but the majority will most likely be disappointed. The pandemic has left a debt legacy for the world’s largest multinational oil firms, several of whom borrowed to finance dividends while rates plummeted.

Any additional cash would be used to reduce debt for Exxon Mobil Corp. and Total SE. The companies had to bear the financial burden of retaining shareholder payouts last year. Chevron Corp. and Royal Dutch Shell Plc have expressed an interest in restarting stock buybacks, but have yet to do so.

After a year and a half of flip-flopping over its dividend scheme, only BP Plc is dangling the prospect of improved shareholder returns. After a disastrous 2020, the coming week’s first-quarter results should show a substantial increase in both profit and cash flow, but perhaps not enough to shift investors’ dissatisfaction with the Oil majors.

JPMorgan Chase & Co.’s head of EMEA Oil and gas, Christyan Malek, said, “They have limited appeal as long-term investments because they can’t demonstrate that they can deliver cash flow on a sustainable basis and return it on a sustainable basis.” According to JPMorgan, the first quarter would be a turning point for the industry. According to company data and forecasts collected by Bloomberg, free cash flow (what’s left after operational spending and investment) for the five supermajors is expected to recover to $80 billion this year, up from around $4 billion in 2020.

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