The five majors made about $70 billion of free cash in the September quarter, up from about $30 billion. They bought back fewer shares and paid down debt. Their shares assume the windfall will last. The companies are planning as if it will not.
The buyback detail deserves more attention than it gets here. These companies made about $70 billion in free cash in the quarter, up from about $30 billion a year earlier, yet bought back only $12.3 billion of shares and Exxon suspended its buyback entirely. That is management voting with its own money: the cash is real, but they would rather de-risk the balance sheet than defend the share price. In my view, that makes the mid-cycle valuation case you describe stronger, not weaker. What I am watching is the December 15 BP strategy update you flagged. If debt targets are declared met and buybacks rise, that is the tell that management thinks current Brent prices are closer to normal than the futures curve does.
One correction first: it was BP that bought back nothing in the quarter, against $750 million a year earlier. Exxon held its buyback at $5.1bn and has set $20bn for next year, about this year's pace. On 15 December, we'd watch BP's order of priorities. It has already said spare cash will go to settling what's left of its Deepwater Horizon liabilities. So even if it hits its debt targets, bigger buybacks may have to wait until those are settled.
Fair correction, and it actually sharpens the point. Exxon is running the $20bn programme while BP is still clearing Deepwater Horizon, so 15 December is about the order of operations: debt targets first, buybacks second. The thing I will watch is whether they put any date on restarting buybacks. Good catch.
The buyback detail deserves more attention than it gets here. These companies made about $70 billion in free cash in the quarter, up from about $30 billion a year earlier, yet bought back only $12.3 billion of shares and Exxon suspended its buyback entirely. That is management voting with its own money: the cash is real, but they would rather de-risk the balance sheet than defend the share price. In my view, that makes the mid-cycle valuation case you describe stronger, not weaker. What I am watching is the December 15 BP strategy update you flagged. If debt targets are declared met and buybacks rise, that is the tell that management thinks current Brent prices are closer to normal than the futures curve does.
One correction first: it was BP that bought back nothing in the quarter, against $750 million a year earlier. Exxon held its buyback at $5.1bn and has set $20bn for next year, about this year's pace. On 15 December, we'd watch BP's order of priorities. It has already said spare cash will go to settling what's left of its Deepwater Horizon liabilities. So even if it hits its debt targets, bigger buybacks may have to wait until those are settled.
Fair correction, and it actually sharpens the point. Exxon is running the $20bn programme while BP is still clearing Deepwater Horizon, so 15 December is about the order of operations: debt targets first, buybacks second. The thing I will watch is whether they put any date on restarting buybacks. Good catch.