The Zhitong Finance App learned that after European energy giant Shell (SHEL.US), another energy giant, announced continued share buybacks in the second quarter. These traditional energy giants, which focus on the petroleum industry, can be described as paying more attention to improving shareholder returns than ever before, and regard improving shareholder returns as the top priority option. According to a statement, BP announced it will complete the repurchase of up to $1.75 billion of the remaining shares in the second quarter. The oil giant promised to buy back $3.5 billion of shares in the first half of this year, in line with the pace of previous quarters.
Continued stock buybacks are an important sign of the oil giants' strong performance reports, as well as an indication that corporate management is full of confidence in the future performance of the company and is therefore willing to spend cash flow to boost the valuation of the company's shares, thereby ultimately raising the level of shareholder returns. According to statistics, these energy giants from Europe are expected to return up to 620 billion euros (667 billion US dollars) to shareholders this year, a new high level in ten years.
The oil giants maintain the pace of buybacks, but they are still below the all-time high
In terms of performance data, these European energy giants have failed to achieve strong net profit with the help of a wave of rising international crude oil prices since the end of 2023, and profits are likely to stop for a long time after that due to falling oil prices and the acceleration of the global shift to renewable energy, but they will maintain the pace of stock repurchases in 2024 and use their cash flow to give back to shareholders as much as possible.
Stock strategists Laurent Douillet and Kaidi Meng from Bloomberg Intelligence said in a March report that energy companies such as Shell, British Petroleum, and Total Energy will face the challenge of meeting their cash return goals as cash flow expectations may deteriorate. According to analysts' consensus expectations, BP's free cash flow is expected to fall by about a quarter in 2024, while French energy giant Total Energy's free cash flow may drop by nearly one-third, and Shell's free cash flow may fall to a lower level.
The reason behind the decline in cash flow expectations of the oil industry giants is inseparable from the declining trajectory of international crude oil prices and the increase in the penetration rate of electric vehicles in China and the US under the global shift to a low-carbon trend. As the risk of conflict in the Middle East gradually eased, oil prices fell sharply last week, and the increase since this year has basically rebounded. The price of Brent crude oil fell by more than 7% last week, the biggest drop since February.
Energy consulting firm Wood Mackenzie (Wood Mackenzie) recently said that since China is close to the peak of transportation fuel demand, and the US has already surpassed this peak, gasoline demand this year may drop from 700,000 barrels per day last year to an increase of 340,000 barrels per day, reaching 26.5 million barrels per day. This is the lowest increase since 2020.
Analysts at consulting firm Rystad Energy recently released a report saying that due to the post-pandemic consumption boom, global gasoline demand in 2024 will increase by about 300,000 b/d compared to about 700,000 b/d in 2023, reaching about 26 million b/d.