To watch this week: big oil, big dividends… not so big earnings?

By:
on Jan 2, 2024
Updated: Jan 8, 2024
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  • Will big oil investors like ExxonMobil see big results reported this earnings season?
  • Big oil companies are expected to report their latest earnings around January 30th. But what to expect?
  • Despite flashy dividends for shareholders, the oil price's future is far from certain this year.

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It’s January again and, around the corner too, is earnings season. And while investors will have their eyes on many sectors in the coming weeks, arguably the results people are most revved up to hear are those of energy stocks.

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Kicking off the proceedings this year is ExxonMobil (the world’s largest private sector oil company), which is set to submit guidance for its next results to the SEC on January 4th (although it’s only expected to officially report its Q4 2024 results in an earnings call around January 30th).

Shell (the second largest) will release a dividend and results update on January 8th and its Q4 results on February 1st, around the same time as fellow big oil players Chevron, TotalEnergies and BP.

A record year for Exxon investors

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Anticipation for these two stocks will be high, considering the fact that both are expected to pay significant windfalls to shareholders in the coming earnings seasons. Last month, ExxonMobil announced that it has ‘more than doubled’ the earnings potential of its shareholders:

Since 2019, solid execution of ExxonMobil’s strategy has increased the earnings power of the corporation, adding about $10 billion to its annual earnings and cash flow at a real Brent price of $60 per barrel. These improvements provide a strong foundation to further grow annual earnings and cash flow by $14 billion from year-end 2023 through 2027”

Meanwhile, Shell is expected to make similarly extravagant overtures to its shareholders, after the recent news that it has inked a five-year crude oil supply agreement with QatarEnergy.

Uncertainty lurking

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However, these splashy press releases aside, the oil price was a far more slippery thing in 2023 than it was in 2022, experiencing significant volatility and noticeably tanking in price since the COP28 agreement, with its historic phrasing to ‘phase out’ fossil fuels.

While some think that oil prices will flatten but demand will surge in 2024 (like JPMorgan in its outlook), others believe that headwinds will keep demand flat for the bulk of the year (including a recent Reuters poll). So, the near future of the oil price seems far from easy to predict.

In spite of this – or perhaps because of it – the Guardian recently reported that the Institute for Energy and Economics and Financial Analysis (IEEFA) believes that 2024 will see even more lucrative dividend payouts for big oil company shareholders in future.

High risk, high reward?

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One way to view this possibility is from the lens of ‘high risk, high reward’. Developing nations with known geopolitical uncertainty often promise high yields on bonds to attract risk takers to invest in them. Perhaps persona non grata companies have to do the same with their share prices in an effort to keep the wheels turning. 

So, will it be the best of times for big oil shareholders in 2024, or the worst of times? While the jury seems to still be out, the results this earnings season and their accompanying dividend announcements could provide some clue. And, in a strange twist of logic, higher dividends could signal more uncertainty ahead.

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