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Investing insights

BP, Chevron and Shell latest results – what investors need to know

The big names in oil & gas recently reported first-quarter results. Here are our key takeaways.
Oil and Gas Industrial zone - Gettyimages

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Jargon in the oil & gas sector can be complicated. One word that gets used a lot is realisations. That’s prices achieved for products sold outside of an oil company. As you can see in the charts below, not all fossil fuel prices move in the same direction.

Past performance isn’t a guide to future returns.
Source: Refinitiv Eikon, 13/05/24.

Oil prices have been down across the board compared to the first quarter in 2023, but it’s more of a mixed bag for gas.

About a third of Chevron’s gas production is US-based. Here prices have plummeted with the benchmark Henry Hub price down over a quarter since April 2023. Oversupply in the US is proving to be a problem. But prices have been stronger for European giant Shell, where production is more diversified.

Prices in Europe have come back down towards levels seen before the Ukraine invasion, following a period of building up inventories. But over the last year, the decline’s been less noticeable than in the US. This could be because of ongoing concerns about supply disruptions.

While the volatility in commodity prices has impacted financial performance, prices in general are still above pre-pandemic levels.

Demands on cash are high

This paints a resilient picture for cash flows, which is just as well. Investment levels are expected to be in line with or above last year's, and dividend payments are forecast to increase.

Share buybacks are also still going and generous payouts are something investors in the sector have come to expect. Although, remember, no shareholder distributions are ever guaranteed.

We see continued investment as the key driver for long-term sustainable growth here. To keep or increase production, oil & gas companies need to replace what they extract. One option is developing new oil fields and investing in existing facilities.

Another is mergers and acquisitions, like Chevron’s proposed $53bn acquisition of Hess. But there are still legal and regulatory hurdles for that deal to complete.

As the world tries to wean itself off fossil fuels, the sector is also investing in future-facing technologies like wind and electric-vehicle charging. The financial returns on these assets can be lower, but they have the potential to offer a more stable financial profile.

Past performance isn’t a guide to future returns.
(Est) = Estimate. Source: Refinitiv Eikon, 15/05/24.

Production is on the rise

The big names certainly aren’t turning their back on traditional fuels just yet.

Chevron’s aiming to up production between 4-7% this year, which after a 12% rise in the first quarter, looks to be on the low side. BP is expecting underlying production to rise by 2025. And Shell’s oil production is set to stay the same out to the end of the decade.

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Where do we stand on the sector?

The oil & gas sector is facing a lot of conversations about its future. That’s seen valuations fall below the historical norm as the industry struggled to firm up on its vision for the future.

There have been some about turns on environmental commitments, but we believe the path to net zero has to be a transition, not a leap. And any transition will be demand and policy driven.

From an investor standpoint it makes sense that the big names focus on their strong points. If oil & gas are underinvested in before renewables are mature enough to pick up the slack, then energy security could be at risk.

Also, by investing in more efficient operations, there are some easy wins on emissions. And areas like carbon capture can be one part of the solution.

Meanwhile the major producers can leverage their distribution networks and infrastructure experience to make sure new energy technology is deployed efficiently and find its way to the end user.

The sector will keep evolving, and investors have generally compensated for the extra risk with a decent yield. However, it’s always probably going to be volatile and dividends are never guaranteed.

We prefer the European names. They have tended to trade at a sizeable discount to US peers. However, they also usually have more diverse earnings streams and a firmer focus on lower-carbon technologies.

Over time, this could help the rating gap close. But for that to happen, the market still needs to see investments in new energy technologies paying off.

Environmental, social and governance (ESG) risk – what investors need to know

Environmental concerns are the primary driver of ESG risk for oil & gas producers, with carbon emissions and waste disposal being the main issues. Health and safety, community relations, and ethical governance are also contributors to ESG risk.



According to Sustainalytics, Shell's management of material ESG issues is strong. This reflects a change in its business mix over recent years towards lower-carbon fuels like gas and liquefied natural gas (LNG), and the exit from some of its more controversial assets.

Even with Shell's numerous environmental and social targets, the company's impact on the environment and society is still relatively high. The decision to hold oil production steady until the end of the decade is likely to be met with disappointment.

Controversies around environmental degradation, bribery and corruption, and community relations continue to play an important role in how Shell’s perceived globally, as well as its financial disclosures of its renewables business.



Sustainalytics also think BP's overall management of material ESG issues is strong. It appears to have strong oversight over its key ESG issue.

The company is aiming to reach net zero across its entire operations (scopes 1 and 2) and upstream operations (scope 3) by 2050. But nearer-term reduction targets for scope 3 emissions have recently been lowered.

BP has also committed to cutting the carbon intensity of its products to net zero by 2050. However, controversies relating to environmental breaches continue to have a moderate impact on BP's overall performance.



Chevron’s management of material ESG issues is also rated strong by Sustainalytics, but we have some concerns.

It’s assessing the commercial viability of clean energy sources and strategies, with the goal of adapting its business activities to align with a low-carbon economy.

The company showcases initiatives to tackle carbon-related risks, like its plan to spend $8bn through 2028 on activities like renewable fuels, hydrogen, carbon capture and offsets.

However, the company doesn’t appear to have absolute carbon reduction plans and remains involved in environmental pollution controversies.

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Written by
Derren Nathan
Derren Nathan
Head of Equity Research

Derren leads our Equity Research team with more than 15 years of experience in his field. Thriving in a passionate environment, Derren finds motivation in intellectual challenges and exploring diverse ideas within his writing.

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Article history
Published: 21st May 2024