• About
    • Which Energy Mix is this?
  • Climate News Network Archive
  • Contact
Celebrating our 1,000th edition. The climate news you need
No Result
View All Result
The Energy Mix
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
No Result
View All Result
The Energy Mix
No Result
View All Result
  FEATURED
EXCLUSIVE: Hydrogen is Up, Pieridae is Out as German Chancellor Preps for Canada Visit August 15, 2022
Historic Climate Bill Passes U.S. House, Goes to Biden for Signature August 15, 2022
BREAKING: U.S. Senate Passes Historic $369B Climate Package August 7, 2022
Researchers Point To ‘Dangerously Unexplored’ Risk of Global Climate Catastrophe August 2, 2022
Koch Network Pressures Manchin, Sinema as Advocates Praise ‘Game Changing’ Climate Deal August 2, 2022
Next
Prev
Opinion & Analysis

Fossils Keep Paying Shareholders Despite Epic Financial Losses, Declining Business Prospects

September 10, 2020
Reading time: 6 minutes
Primary Author: Compiled by Mitchell Beer @mitchellbeer

/pxhere

/pxhere

3
SHARES
 

Some of the world’s most colossal fossils posted epic financial losses between April and June this year, all in the interest of preserving their dividends to shareholders, the Institute for Energy Economics and Financial Analysis concluded in a research brief late last month.

“It was a dismal quarter capping a disappointing decade for the global oil supermajors,” said lead author and IEEFA financial analyst Kathy Hipple.

“Overall, the five global oil and gas supermajors posted disappointing results after the worldwide coronavirus crisis crimped energy demand and sent prices plummeting,” IEEFA writes, with ExxonMobil standing out as a particularly poor performer.

But the quarterly crash appears not to have deterred the companies from protecting the dividends that keep investors onside. “The five supermajors—ExxonMobil, Royal Dutch Shell (Shell), BP, Chevron, and Total—collectively paid US$16.9 billion more to shareholders than they generated from their core business operations, plugging the gap with borrowing and asset sales,” IEEFA concludes.

“The red ink flowed even as the five companies slashed capital expenditures from $21.6 billion in the second quarter of 2019 to $15.4 billion last quarter, a 29% decrease,” IEEFA writes. “More alarmingly, four of the five companies kept shareholder dividends steady despite their disappointing performance. To help plug their cash deficits, the five companies borrowed heavily, increasing their cumulative debt to $290 billion, a $50 billion increase over the previous quarter.”

Some of those companies also made a series of stranded asset announcements that sent shockwaves through parts of the fossil industry.

The financial reversals were not without consequences for the companies. In late August, Storebrand ASA, a Norwegian life insurance company with assets of about $91 billion, announced it had sold off its shares in Exxon and Chevron, as well as mining company Rio Tinto and chemicals producer BASF, in response to the companies’ lobbying against the Paris Agreement and climate regulation, Bloomberg Green reported. Storebrand also dumped tar sands/oil sands producers ConocoPhillips and Husky Energy.

“We need to accelerate away from oil and gas without deflecting attention onto carbon offsetting and carbon capture and storage,” said CEO Jan Erik Saugestad. “Renewable energy sources like solar and wind power are readily available alternatives,” and “the Exxons and Chevrons of the world are holding us back.”

Fossil researchers at Rystad Energy saw no likely respite for oil markets, with senior oil markets analyst Paola Rodriguez-Masiu labelling September a month of “delayed summer blues” for fossils.

“We don’t see oil prices bouncing back anywhere near to the $50 per barrel level anytime soon unless OPEC+ decides to deepen the current cuts,” she told fossil industry newsletter Rigzone earlier this week. “Although ideal, we find this scenario unlikely.”

Exxon was also dumped from the prestigious Dow Jones Industrial Average, in what Bloomberg called a “stunning fall from grace for Exxon, the world’s biggest company as recently as 2011.” Exxon, which has faced mounting skepticism from financial analysts, was the only fossil out of three companies dropped from the Dow. “Those changes are a sign of the times—out with energy and in with cloud [computing],” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance.

But “while any change to the Dow is notable, the ejection of ExxonMobil, the longest-serving member, marks a particularly rapid shift in fortunes,” Bloomberg noted. “Worth $525 billion in 2007 and more than $450 billion as recently 2014, the stock had fallen in four of six years before 2020 and is down another 40% since January. It’s now worth about $180 billion.”

Those attention-grabbing numbers were just one small part of the dire news flowing through the fossil sector in late August and early September, with some producers beginning to question whether it’s worth their while exploring for new sources of oil and gas, according to one Bloomberg analysis.

“As the coronavirus ravages economies and cripples demand, European oil majors have made some uncomfortable admissions in recent months: oil and gas worth billions of dollars might never be pumped out of the ground,” the news agency wrote. “With the crisis also hastening a global shift to cleaner energy, fossil fuels will likely be cheaper than expected in the coming decades, while emitting the carbon they contain will get more expensive. These two simple assumptions mean that tapping some fields no longer makes economic sense.”

“There will be stranded assets,” Muqsit Ashraf, Accenture’s senior managing director responsible for the global energy industry, told Bloomberg reporter Laura Hurst. “Companies are going to have to accept the fact.”

“Many assets are already stranded from an oil price cycle perspective,” added Christyan Malek, JPMorgan Chase’s head of oil and gas research for Europe, the Middle East, and Asia. “But when you then add the carbon curve, that takes a bigger chunk out.”

Hurst’s analysis reviews the shakier prospects for existing or potential oil and gas developments in the Falkland Islands/Malvinas, Brazil, Angola, and the Gulf of Mexico, while a separate Bloomberg story a week later had China pulling back on its annual seasonal purchases of liquefied natural gas (LNG). Visual Capitalist published a tracker for what it called a “growing wave” of fossil bankruptcies, about a month before oilfield services giant Schlumberger announced it was pulling out of the North American fracking industry.

“For Schlumberger, the world’s top oilfield services company, the deal is a massive reversal from its North American buying binge over the past few years,” Bloomberg wrote, although Schlumberger’s buyer, Denver-based Liberty Oilfield Services Inc., was rather more upbeat about the industry’s post-pandemic prospects.

With U.S. oilfield service job losses hitting 99,253 since the dawn of the pandemic, Norwegian fossil Equinor announcing job cuts in Canada, the U.S., and the UK, an Ernst & Young Canada report predicting that half of fossil “job competencies” could be automated by 2040, and the Canadian fossil industry cutting its capital spending by more than half, three veteran Alberta energy analysts said Ottawa shouldn’t spend money trying to “revive a dying dream”.

Given her former, unofficial cabinet role as minister responsible for defusing Western alienation, a “major public investment in decarbonizing oil production” might be an obvious, major component of Finance Minister Chrystia Freeland’s plan to “build back better” after the pandemic, wrote Harvard University professor David Keith, Colorado School of Mines researcher Sara Hastings-Simon, and Alberta clean energy analyst Ed Whittingham in the Globe and Mail.

“There is widespread support for this approach,” they said. “After all, many of Alberta’s oil producers are in the high-cost, high-carbon quadrant, and for them to follow the world in moving to low-carbon energy, the public needs to help with the Herculean adjustment effort. Many see this as critical to the economic future of Alberta.”

But “this would be a case of building backward, not back better,” they added. “One need not be an economic Einstein to see that the combination of flattening demand and increased supply means downward pressure on prices. While geopolitical shocks and business cycles will occasionally spike prices, the oilpatch fantasy of a return to long-run triple-digit [oil] prices has melted away faster than our glaciers, a fact increasingly acknowledged by the oil majors themselves.” And “while the growth of global climate policy is unsteady, humanity can’t dodge climate reality, and policies will have to grow stronger.”

The combination of pressures shows that “not even the most heroic engineering achievements can change oil market fundamentals,” Keith, Hastings-Simon, and Whittingham write. “It’s clear that emissions reduction moonshots won’t save the industry. Continuing to invest significant funds into maintaining sales in a shrinking market is a bad business proposition and a bad use of public funds.” The three authors have their own suggestions for truly diversifying Alberta’s economy and creating a job transition that won’t be scary for today’s fossil work force.



in Africa, Brazil, China, Climate & Society, Community Climate Finance, Ending Emissions, Fossil Fuels, International Agencies & Studies, Jobs & Training, Jurisdictions, Oil & Gas, Opinion & Analysis, Shale & Fracking, South & Central America, Sub-National Governments, Tar Sands / Oil Sands, UK & Europe, United States

The latest climate news and analysis, direct to your inbox

Subscribe

Related Posts

Suncor Energy Plant_Max and Dee Bernt:Flickr
Ending Emissions

Fossils Would ‘Bust the Paris Agreement’ with Inadequate Decarbonization Plans

August 18, 2022
2
Ken Hodge/Flickr
Oil & Gas

No Path for Canadian LNG Exports to Europe, IISD Analysis Concludes

August 18, 2022
3
Steve Jurvetson/flickr
International Security & War

The Other Kind of Climate Change: Even a ‘Limited’ Nuclear War Would Trigger Starvation, Kill Billions

August 18, 2022
75

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Trending Stories

Brocken Inaglory/wikimedia commons

State-Wide Megastorm Driven by Global Heating Could Drench California for a Month

August 15, 2022
1.1k
https://commons.wikimedia.org/wiki/File:Coal_Carbon_Capture_Technology_In_Use.png

Carbon Capture a ‘Dangerous Distraction’, 500 Organizations Warn Canada, U.S.

July 23, 2021
617
TGEGASENGINEERING/Wikimedia Commons

EXCLUSIVE: Hydrogen is Up, Pieridae is Out as German Chancellor Preps for Canada Visit

August 15, 2022
1.1k
Vinaykumar8687/WikimediaCommons

Solar On Track for ‘Staggering’ 30% Growth This Year

August 15, 2022
315
Early stages of construction on the Flamanville 3 nuclear reactor in France

Failing French Nuclear Plants Drive Up Electricity Costs as Heat Waves Cut Production

August 14, 2022
753
rawpixel

Common Medications Foil Body’s Ability to Cope with Hot Weather

August 15, 2022
205

Recent Posts

Suncor Energy Plant_Max and Dee Bernt:Flickr

Fossils Would ‘Bust the Paris Agreement’ with Inadequate Decarbonization Plans

August 18, 2022
2
Ken Hodge/Flickr

No Path for Canadian LNG Exports to Europe, IISD Analysis Concludes

August 18, 2022
3
Steve Jurvetson/flickr

The Other Kind of Climate Change: Even a ‘Limited’ Nuclear War Would Trigger Starvation, Kill Billions

August 18, 2022
75
kris krüg/flickr

Guilbeault Considering Alternatives to Releasing Toxic Tailings into Athabasca River

August 18, 2022
2
Ford F-150 LIghtning

U.S. Utility Plans to Draw Power from Ford Electric Pickups

August 18, 2022
2
power pylons sunrise grid

Midwestern U.S. Grid Investment Supports Massive Increase in Renewables

August 18, 2022
3
Next Post
Myke2020/Wikimedia Commons

Husky Seeks Government Bailout for $2.2-Billion Fossil Project Off Newfoundland Coast

The Energy Mix

Copyright 2022 © Smarter Shift Inc. and Energy Mix Productions Inc. All rights reserved.

Navigate Site

  • About
  • Contact
  • Privacy Policy and Copyright
  • Cookie Policy

Follow Us

No Result
View All Result
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities

Copyright 2022 © Smarter Shift Inc. and Energy Mix Productions Inc. All rights reserved.

Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}