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 accumulated in their bank accounts. Wall Streeters have some ideas on how to spend it. Moreover, investing in new boreholes is far from the very top of this list. The scheme to squander 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 sought growth and invested in drilling by reducing their stock weightings instead tried to appease brokers and the market by increasing dividends and buying back shares, i.e. returning equity. money to shareholders.
The available cash also helped offset stock prices, which often fluctuated with the volatility of commodity markets. Steady profitability also supports an industry whose long-term prospects are uncertain as governments, markets and the global economy shift to cleaner energy.
The paradox is very well described by the author:
Now the money is flowing, even though 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 paid 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 big oil companies suggests that their days, like those of the entire industry, are numbered. There are only ten or fifteen years left before the global energy market changes completely.
The gradual death of the industry will give birth to related industries and brokers who will gladly dissect the rich legacy of former greatness, which now resides in accounts at well-known banks.
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