As crude prices fall, investors fear that Big Oil may reduce share buybacks.
Investors will pay attention to the fact that falling oil prices are increasing the risk of dividends and share purchases for the remainder of 2025. Big Oil's efforts to win over Wall Street have been based on reinvesting cash in the form of dividends and stock repurchases. U.S. president Donald Trump's announcements of global tariffs have caused fears of a weaker oil market and a possible recession, leading forecasters to reduce their oil price expectations.
If prices were lower, Big Oil would have less money to give to its shareholders.
In a research note, Paul Cheng, a Scotiabank analyst, wrote: "We believe the quarterly results will get overshadowed given the turmoil on the commodity markets."
Analysts said that investors will be looking for companies to explain how they plan on dealing with the sustained decline in oil prices. This could include reducing share repurchases or cutting back on spending.
Exxon, and Chevron are the two biggest oil producers in the United States. Both companies will report their earnings on Friday, and they're expected to show a profit increase from the previous quarter. According to LSEG, analysts expect Exxon to earn $1.73 per share and Chevron $2.18.
Brent crude oil prices, the global benchmark, averaged $74.98 per barrel in the quarter January-March. This was an increase of 1.3% over the previous quarter. U.S. natural gas prices rose 30%.
After Trump announced tariffs against trading partners, oil prices started to plummet on April 2.
Analysts have been modeling scenarios in which oil prices will remain around $60 this year, or even fall to $50.
Brent oil prices averaged $66.79 per barrel so far in April. The U.S. Energy Information Administration cut its price forecast from $74.22 per barrel to $67.87 by 2025. The EIA expects a price average of $61.48 in 2026. This is down from the previous $68.47.
Analysts from four companies have said that Chevron could reduce its buybacks in the event of continued low oil prices. The second largest U.S. oil firm previously guided annual share buybacks between $10 billion to $20 billion. The company has begun cutting costs by up to $3 billion and is preparing to lay off up to 8,00 employees. Analysts said that UK-based BP could be forced to reduce share buybacks, increasing pressure on the company's already low performing shares.
RBC Capital Markets estimates that Chevron needs a Brent price at $95 in order to cover dividends, buybacks and other expenses. Exxon requires $88 to do the same. Prices in the mid-$50s can cover dividends for both companies.
Analysts from Bank of America Global Research predict that Chevron's share repurchases will be $11 billion this year. This is at the lower end of their guidance. Exxon, on the other hand, expects to repurchase about $13.5 billion shares, which is below the $20 billion guidance.
At least three analysts agreed that Exxon was in a better position to continue dividends and share purchases, pointing out the surplus cash on its balance sheet and the efforts to reduce the cost of producing oil and natural gas. Exxon said that it would repurchase shares worth $20 billion annually until 2026. Last year, the company paid out $16.7 billion as dividends.
In a research report, Scotiabank's Cheng stated that "we think (Exxon), could maintain its payout pace more than their peers."
Exxon-Chevron has not responded to any requests for comments.
Jason Gabelman wrote in a note dated April 11, that it is unlikely for companies to announce cuts in capital expenditures in the near future, but they could do so in the future. He wrote that spending on green energy projects and shale assets would be the most likely to be cut, as shale can be produced more quickly and energy transition is not yet a significant part of businesses. Exxon spends less than half of its 2025 capex on these two segments. Sheila Dang reported from Houston, and David Gregorio edited the story.
(source: Reuters)
