Oil giants are preparing for the worst year since the pandemic: market analysis
30 April 18:37
The world’s largest oil companies are facing the most difficult period since the pandemic. Falling oil prices are seriously reducing their profits and undermining investor confidence ahead of the quarterly reporting season. This is stated in the Financial Times article “Big oil companies brace for worst year since pandemic as soaring profits decline,” "Komersant Ukrainian" reports.
According to the newspaper, the situation has worsened in recent weeks due to increased supply from OPEC and escalating trade conflicts under the Trump administration. The price of Brent crude oil has recently dropped below $60 per barrel, and analysts predict that in the second half of 2025 it could be 20% lower than last year’s average of $81.
2025 will be the third consecutive period of falling profits for the oil giants after the peak in 2022, which was caused by Russia’s full-scale invasion of Ukraine. The adjusted net income of the five largest Western oil companies – ExxonMobil, Shell, TotalEnergies, Chevron, and BP – fell by about $90 billion between 2022 and 2024.
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The need for difficult choices is a consequence of bad decisions
The FT writes that shareholders are now questioning whether any of the big companies have the financial discipline and strong balance sheets to sustain the high dividends and share buyback programs that have been offered in recent years. Biraj Borkhataria, an analyst at RBC Capital Markets, notes that investors are concerned about who will be the first to cut payouts and are looking for some reassurance in an uncertain environment.
The Italian company Eni has already released its first quarter results, which give an idea of how companies are responding to the situation. Eni has promised to cut its costs by at least $500 million this year, and its cash flow will be $2 billion (or 15%) lower than expected at an oil price of $65 per barrel. However, the company has committed to keeping shareholder payouts unchanged.
Across the industry, companies are cutting back on their investments in response to the fall in oil prices, the article says. Fraser Mackay of the energy consulting company Wood Mackenzie notes that for the first time since 2020, global spending on oil production development is expected to fall on an annualized basis.
According to the Financial Times, BP is to report its results on Tuesday, followed by Total on Wednesday, and Shell, ExxonMobil, and Chevron on Friday. Most analysts predict a weak quarter for these companies, but the sharpest drop in oil prices occurred after the end of the reporting period, so investors will be more interested in the forecasts that the companies will provide.
Among the European giants, Shell looks better prepared for the downturn, the publication says. CEO Wael Sawan promised in March to return half of Shell’s cash flow to investors. He also said that the company could continue to buy back its shares if the oil price falls to $50 per barrel and would maintain dividends even at $40 per barrel.
The most vulnerable oil giant is probably BP, which is under pressure from the activist fund Elliott Management. BP’s promise to return 30-40% of its cash flow to shareholders was based on an oil price of $71.50 per barrel this year. Every dollar of oil price drop below this level will affect profits by about $340 million, the company said in February.
In the United States, the authors write, ExxonMobil and Chevron show different results. According to TD Cowen analyst Jason Gabelman, Exxon’s strong asset base allows it to maintain shareholder payments until 2026, while Chevron will likely be forced to revise expectations. Chevron has previously presented a share buyback range of $10 to $20 billion at oil prices of $60 to $85. If the price moves to the lower end, it could mean that buyback programs will be revised downward.
In addition to the majors, smaller shale oil producers and oilfield service companies are also warning of a tightening environment if prices remain low. Last week, three of the largest Western oilfield service companies – Baker Hughes, Halliburton, and SLB – expressed concern about the deteriorating outlook.
The industry is changing
In conclusion, the article shows that the fall in oil prices in 2025 has created a clear differentiation between oil companies in terms of their financial stability. Those companies that have optimized their operations in advance and built up a strong financial reserve, such as Shell, will be able to survive the crisis without significant dividend cuts and share buyback programs. In contrast, companies with a less diversified asset portfolio or greater dependence on high oil prices, such as BP, face a difficult choice: cut payouts to shareholders or increase debt.
In the long run, this crisis could trigger a new cycle of consolidation in the industry, with stronger players taking over weaker ones, and accelerate the transition of oil companies to more balanced energy portfolios with renewables as a hedge against the volatility of the traditional oil market.
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