For the first time since the West’s five energy supermajors were created in the early 2000s, all of them are expected to post a quarterly loss.
Once a money-making machine, Big Oil is now relying on ever-increasing amounts of debt, raising the pressure on highly prized dividends. BP may cut its payout for the first time since the Deepwater Horizon disaster a decade ago.
For BP, analysts from banks including Goldman Sachs Group Inc. and Citigroup Inc. are expecting a cut in the payout of anywhere between 30% and 65%, a historic move for a company that has been a cornerstone dividend payer in the U.K.’s FTSE 100 index for decades. It would reduce the amount of debt needed and free up cash for Chief Executive Bernard Looney’s high-profile strategy to offset almost all of the carbon emissions from the company’s operations and the fuel it sells to customers.
European majors will remain more indebted than their U.S. rivals, but dividend cuts may bring some relief. Despite having low debt coming into the crisis, Exxon’s borrowing is rising rapidly and over time will become a cause for concern, according to Morgan Stanley and Goldman. Exxon’s net debt climbed by $8.8 billion in the quarter and will surge to $78 billion by the end of 2022, Goldman said. Chevron’s agreement to acquire Noble Energy Inc.
Results will reflect a tumultuous quarter in which Brent crude averaged about $33 a barrel, less than half the level a year earlier, but with a massive spread between the high and low points of some $20. That throws further uncertainty into the mix for trading and derivatives.
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