Connoisseurs saw it coming from far away: the profit figures for large oil and gas companies such as Shell, BP and Saudi Aramco fell, albeit less hefty than analysts had expected. In addition to that drop in profit, there were two striking trends at the oil and gas companies, it turned out that the publication of the sector figures.
1. Falling profit due to fluctuating gas and oil prices
The fact that companies saw their profit figures in recent months was largely due to the decreased oil price. Oliek cartel OPEC+, a group of 23 oil-exporting countries led by Saudi Arabia and Russia, decided to produce more oil. That prints the oil price. The price of a barrel of Brent oil, the most used oil price in Europe, fell from around 80 US dollars (69 euros) to something under 70 dollars between the beginning of this year and the end of July. With outliers down just over $ 60.
Why did OPEC+ made that decision? According to Press agency Bloomberg Is that because some Member States structurally produce too much, in particular Kazakhstan and Iraq. A lower oil price must encourage those countries to produce less, but in the end such a decision is also disadvantageous for oil and gas companies in other countries.
In the past six months, oil and gas companies have occasionally benefited from the geopolitical tensions. After the Israeli attacks on Iran, the price of a barrel of Brent oil rose temporarily by 10 percent last June, to more than $ 77. But still: anyone who looks at the first half year as a whole, “sees that the oppressive effect of oil cartel OPEC+ is stronger,” says market analyst Jean-Paul van Oudheusden of investment platform Etoro.
Oil and gas companies also suffer from turbulence on the market, especially as a result of Trumps trade war. The price fluctuations in oil and gas were so unpredictable that even the best traders on the oil and gas market could barely anticipate that.
Shell had already warned about disappointing income earlier this year. That is why analysts screwed down their expectations for the shell figures. On average, they predicted a so -called adapted profit, the figure that analysts are interested in, of 3.7 billion dollars.
Eventually the decrease was not too bad, it turned out when Shell opened his cash book last week. Shells Adapted profit dropped from $ 5.6 billion in the first quarter to 4.3 billion dollars in the second quarter. In 2024, the win for the second quarter was still $ 6.3 billion. Turnover fell by 12 percent, from $ 73.2 billion in the first quarter to 65.4 billion in the second quarter. Shell does not want to say how strongly the profit from the trade division has decreased in connection with ‘competitive sensitivity’.
For BP, the adapted profit in the second quarter was 2.4 billion dollars, 15 percent less than in the same quarter a year earlier. Analysts counted on around 1.8 billion dollars. Saudi Aramco, the largest oil company in the world, saw his adapted profit of almost 14 percent fall to $ 24.5 billion. The estimate of analysts was 23.7 billion.
Why did the companies performed better than analysts had expected? “The belt was cited,” says Van Oudheusden. To compensate for the decreased oil price and to deal with the turbulence on the market, “have to choose companies: or produce extra oil and gas or save on, for example, staff and projects. Many companies chose the latter and did better than analysts.”
BP has long been busy cutting back. Last Tuesday, the company said that it had implemented $ 1.7 billion in savings since BP boss Murray Auchincloss announced its cost-saving program last year. In the first half of this year, the company saved 900 million euros.
It is not surprising that the American companies reported ExxonMobil and Chevron a record in production. “The call of Trump, Drill Baby Drillthey perform reluctantly in the difficult market conditions, “says Van Oudheusden. For example, Chevron produced 3.4 million barrels per day. 40,000 more than the previous quarter, reports The British business newspaper Financial Times. Those companies also saw their profit fall considerably, but due to the high production volumes they raised more money than analysts had estimated.
2. Reward shareholders
For years it has been “in fashion” at oil and energy groups to reward shareholders by buying their own shares, says Van Oudheusden. “Companies are more careful with investing in new projects. Investing is much risky than before, due to geopolitical tension and all kinds of environmental investigations that are needed to get permits.” So companies have money to purchase their own shares. A decrease in the number of outstanding shares makes the profit per share higher.
Shell will also buy its own shares for $ 3.5 billion again next quarter. This will be the fifteenth quarter in a row in which Shell buys back for at least 3 billion in shares, the company said last week. BP makes 750 million dollars free for it.
3. More focus on fossil fuels
Although, according to Van Oudheusden, the gas and oil giants generally invest more cautiously, BP showed out last Monday with its “largest oil and gas find in a quarter of a century.” It is an oil and gas column with an area of more than 300 square kilometers, 404 kilometers from Rio de Janeiro. Although it is still unclear how much oil and gas can actually be extracted, how profitable that is and whether the Brazilian government gives permission to drill to oil and gas.
Pruning in greening plans and focusing on fossil is a clear trend among oil and gas companies
What is clear in any case: the extraction of new oil and gas fields will not help to stay below 1.5 degrees warming (compared to the pre-industrial temperature), such as countries in the Paris Agreement.
Pruning in greening plans and focusing on fossil is a clear trend among oil and gas companies. Companies reduce their greening ambitions due to profits and due to pressure from shareholders. Earlier this year, BP announced the ambitious green plan to reduce oil production by 40 percent, almost completely abandoning.
During the presentation of the quarterly figures last week, Auchincloss repeated his earlier statement that BP “stops projects that are not competing for capital” and that the company focuses entirely on “growing returns and shareholder value in the long term.” Shell CEO Wael Sawan indicated earlier this year that he would cut into business activities that do not render enough. That appears to be the sustainability branch of Shell in particular.
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