Oil majors face spending test from Iran war windfall cash
XLE•Oil majors are expected to post sharply higher third-quarter profits as disruption to the Strait of Hormuz boosts refining and trading results. Investors will watch whether companies stick to spending plans; Shell has forecast refining margins of $42 a barrel, while HSBC expects its quarterly buyback to rise to $3.5 billion.
1. Windfall boosts earnings
Oil majors are expected to report a large increase in third-quarter profit after disruption to the Strait of Hormuz pushed energy prices to multi-year highs and increased trading volatility. Shell, BP and TotalEnergies expect refining margins to rise three- to fourfold year on year, with Shell guiding for a record $42 a barrel.
2. Spending under scrutiny
Investors are watching whether companies maintain existing spending plans despite exceptional earnings. Chevron and Exxon have used cash to pay down debt, while HSBC expects Shell to announce a $3.5 billion buyback for the fourth quarter, up from its current quarterly pace of $3 billion.
3. BP prioritizes debt
BP’s underlying profit could exceed $7 billion, versus $5.7 billion in the second quarter, according to TPH. The company is using cash to repair its balance sheet, and HSBC said it expects BP to prioritize reducing debt, keep capital spending stable and not resume buybacks before 2028. Shell and TotalEnergies report on October 29; BP, Chevron and Exxon report on October 30.
