Revenge of the Old Global Financial System as Big Oil Coins Float in Opponents Tech, Auto News, ET Auto
Exxon, which lost money for the first time in its history throughout the pandemic, now ranks as the third largest free money generator in the S&P 500 index. coins floaton the back of the most efficient Apple Inc. and Microsoft Corp, according to insights compiled via Bloomberg.
In another sign of oil’s resurgence, Chevron Corp. surged through the ranks with an influx of coins that shocked analysts who were already anticipating a quarterly report.
It’s a development that Jeff Currie, senior commodities strategist at Goldman Sachs Group Inc., calls “revenge of the old economy.” Although accelerated by Russia’s invasion of Ukraine, the seeds of today’s power rally were sown by investors’ desire for tech stocks over commodities a decade ago, Currie says, this which has resulted in anemic financing in tough energy properties like mines, oil fields and refineries. .
While buyers are really feeling the pinch of rising gasoline prices, oil explorers — especially those who have favored raw, plant-based fuel over renewables — are best positioned to take advantage.
“Exxon and Chevron have shown a good example of the magnitude of shareholder returns they can generate at $100 a barrel of oil,” said Matt Murphy, Calgary-based analyst at You sleepPickering, Holt & Co. “This will grab the attention of investors looking for yield as we sink deeper into the recessionary environment.”
Executives at each company said they didn’t see much evidence of fuel demand destruction as recession fears mount.
“I wouldn’t tell you we’re seeing something I would say, we’re in recession or near recession,” Exxon Chief Executive Darren Woods said in a pick with analysts.
Exxon, Chevron, Shell Plc and TotalEnergies SE all reported earnings this week. All increased percentage buybacks except Exxon, which tripled previous buybacks during the year.
It’s a stark reversal from much of the decade when the field was once hammered for specializing in megaprojects, dismal financial efficiency and failing to advance the energy transition away from fossil fuels.
Exxon is certainly the most productive body in the recovery. Just 12 months ago, its three biggest traders suffered a dangerous defeat on the board by electing three new directors after an acrimonious campaigning via Engine No. 1.
American oil Titan as a result, capital spending has been locked into traditionally low ranges and reduced prices, putting it well positioned to reap the benefits of soaring commodity prices. Exxon is up 58% year over year.
Woods said his plan to increase manufacturing, touted by traders and environmentalists when it was introduced in 2018, is now paying off as he builds cash-generating property. “I had a lot of pressure about it and criticism, spending that money upfront,” he said. “I think it was the right strategy.”
Investors are starting to realize this. The top 10 top performers in the S&P 500 are all power companies and the field now represents 4.5% of the index, more than double its pre-pandemic weighting. The 10 worst come with former tech superstars Netflix Inc. and Meta Platforms Inc.
“We have record free cash flow returns across the old economy,” Currie said on Bloomberg TV last month. “We’ve favored short-cycle iPhones over copper mines for the past decade, and that’s the shortage we’ve been left with.”
With the help of Tom Contiliano.