Cash-rich oil majors face post-Iran strategy rethink: Bousso
XLE•The five largest Western oil companies are expected to report combined third-quarter profits of about $53 billion, up from $48 billion in the second quarter, while their combined debt is forecast to fall to $150 billion from $200 billion in the first quarter. The article argues that the companies must decide how to invest their cash as the Iran conflict reshapes energy markets.
1. Profit and debt outlook
BP, Chevron, Exxon Mobil, Shell and TotalEnergies are expected to report combined third-quarter profits of around $53 billion, RBC Capital Markets estimates, compared with $48 billion in the second quarter and more than double year-earlier levels. LSEG estimates combined debt will decline to $150 billion in the third quarter from $200 billion in the first quarter, as companies have directed billions toward debt reduction rather than major new investments.
2. Refining and supply shifts
Record refining margins have driven the earnings surge. US benchmark crack spreads averaged about $63 per barrel so far in the third quarter, versus $50 in the second quarter and $26 a year earlier; Exxon has refining capacity of roughly 4 million barrels per day, the largest among the majors. The article says new refining capacity may be more attractive in Asia or Africa, while companies are accelerating existing projects and exploration in countries including Namibia, Brazil, Angola and Venezuela.
3. Longer-term investment choices
The conflict has led buyers to diversify supplies and pay more for reliable deliveries, while Asian buyers are increasingly sourcing crude and liquefied natural gas from the Atlantic Basin. Longer voyage times have pushed tanker rates to record highs, potentially supporting more investment in tankers, storage and trading infrastructure by companies including Shell and BP. The article says oil majors will need to set out how they will use their cash in a market shaped by higher geopolitical risk and longer supply chains.
