Oil and gas companies have accumulated a huge amount of free money, which has never happened in recent history. Tens of billions of net profits have accumulated in their bank accounts. Wall Streeters have a few ideas on how to spend it. Moreover, investment in new drilling is far from being at the very top of this list. The scheme for wasting crazy billions is described by Bloomberg columnist Matt Levin.
Even as the uncertain economic outlook weighed on oil in 2023, making it the worst sector in the S&P 500, cash continued to flow into the accounts of major producers. Companies that used to seek growth and invest in drilling by reducing the weight of their shares have instead tried to appease brokers and the market by increasing dividends and buying back shares, i.e. returning money to shareholders.
Free cash also helped offset stock prices, which often fluctuated with commodity market volatility. Stable profitability is also supporting an industry with an uncertain long-term outlook as governments, markets and the global economy gradually transition to cleaner energy.
The paradox is very well described by the author:
Now the money is flowing, although the business as a whole is in decline. It’s just that your commodity business has a natural lifespan and the end is in sight.
Levin writes.
The funds given to shareholders are already their headache, whether they spend them on yachts and mansions or investments in the future, in green energy. In any case, the behavior of the major oil companies suggests that their days, like those of the entire industry, are numbered. There is no more than ten or fifteen years left until the global energy market changes completely.
The gradual death of the industry will give rise to related industries and brokers who will gladly dissect the rich legacy of the former greatness, which now lies in accounts in well-known banks.
2023-05-09 07:57:14
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