OPINION: The initial wave of first-quarter results show that Big Oil has no qualms about rewarding shareholders as their top priority, even if more of the largesse could go into pushing the energy transition.

The earnings season for the first three months of 2023 is now under way and will be the talk of the industry for weeks, but we already have a sense of deja vu.

After a stellar 2022 performance for oil majors as the world battled an international energy crisis, the trend in 2023 so far remains that of outsized profits and surplus cash.

While results are still to be released for several big names, several have already done so, including BP, TotalEnergies, Eni, ExxonMobil and Chevron.

And if their performance is anything to go by, we can expect — as Bank of America described it to Upstream — “another very strong quarter for the sector”.

First-quarter financials have been hit by lower commodity prices, but the tailwinds of last year’s global disruptions continue to reward industry players.

On Tuesday, BP posted an adjusted net income of nearly $5 billion for January-March. The performance was down on the previous quarter but nonetheless above analysts’ expectations and historically higher than most of the past decade.

France’s TotalEnergies booked a net income of $6.5 billion in the period, in line with consensus, while analysts described the profits for Italy’s Eni, at €2.39 billion ($2.63 billion), as “well ahead of expectations”.

In the US, things look even better.

Chevron reported earnings of $6.6 billion, improving on the $6.3 billion posted at this time last year. And fellow supermajor ExxonMobil saw another record-breaking quarter, with net income of $11.4 billion.

Each of these companies was still able to exploit the extreme market conditions that supported the business during the global disruptions of the past year, be it outsized refining margins, arbitrage windows or price volatility.

Shell’s first quarter results on Thursday confirmed this trend. The company beat analysts’ expectations by a large margin, booking $9.1 billion in earnings for the period. Thanks to the performance of its trading desk, Shell largely offset the fall in realised sales prompted by lower commodity prices.

Even as overall earnings decline from the highs of 2022, companies are still generating a lot of extra cash.

BP alone posted $2.3 billion of surplus cash flow for the first quarter.

This begs the question of how this money will be put to use, and if any of it will go into pushing the energy transition.

Bloomberg New Energy Finance estimates that taking the world economy to net zero emissions by 2050 will require a threefold-plus increase in overall capital deployment, both public and private.

From this perspective, few players seem to be in a better position to kick off that investment expansion than the oil companies that have been trying so hard to brand themselves as the frontline of the transition and part of the solution to the climate imperatives.

Nevertheless, none of the majors so far seem likely to do that, with most of this quarter’s extra cash going into new share buy-backs and dividends.

BP stressed it aims to earmark 60% of this year’s surplus cashflow solely for buy-backs.

One may be forgiven for thinking that the shift to a lower-carbon world is somewhat less of an urgency when compared with hard cash.

But as long as Big Oil continues to rake in this kind of money, the onus will be on them to show they genuinely want to push the decarbonisation agenda, or merely act as a golden ticket for shareholders.

(This is an Upstream opinion article.)

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