Recovery and green policies will make oil companies ever richer

World listed oil companies are set to see their combined "Free Cash Flow", FCF – all cash flows from upstream business, excluding those from financing or investment hedging effects – rise to a record $ 348 billion in 2021. According to Rystad Energy estimates, that is 37 billion dollars more than the previous all-time high of 311 billion dollars, generated in 2008. At the time, just before the financial crisis, oil prices were in average of $ 100 per barrel. The FCF is the share of the gross margin which then goes to repay investors and credit companies.

The key driver for record cash flows would be the US shale patch, which is the production of shale oil from US shale which will generate 60 billion extra margin. After years of US oil companies struggling to be profitable, this is a significant turnaround as Free Cash Flow was even negative until yesterday.

According to Bloomberg Intelligence estimates, US shale oil producers are expected to generate free cash flow of $ 30 billion in 2021, thanks to lower capital expenditures and higher oil prices. This year, therefore, could be the beginning of what analysts have begun to call "a new era" for US shale, in which shareholder returns and debt payments take precedence over production growth and debt. record production.

The conventional onshore supply segment will earn the largest share of free cash flow, at $ 160 billion, but this will still be below the 2011 record for these upstream businesses, the intelligence firm said.

This will be a huge boost to the profits of the oil companies. Gross revenues of all listed companies are set to grow 55%, or nearly $ 500 billion, this year compared to last year, thanks to rising oil prices, increased global demand and a market closer. Considering that the spending levels of globally listed energy and oil companies are set to rise by just 2% this year.

Stop for a moment! But shouldn't Green Deal and green policies doom the sector to death? No, they make it richer and more convenient, in fact:

• post covid has brought about a recovery that has increased demand, at any price;
• fewer investments by large companies limit the output, or leave it to the smaller ones;
• in the Shale sector there is no longer any reason to go crazy for new, perhaps unprofitable investments;
• OPEC + is working to limit supply and keep prices high.

A real boon for oil companies, especially those that continue with disciplined and controlled investments. So this mid-sized industry is likely to be a real profit cash cow. The future of profits is not green …

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The article Recovery and green policies will make oil companies richer and richer comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/ripresa-e-politiche-verdi-renderanno-le-societa-petrolifere-sempre-piu-ricche/ on Wed, 30 Jun 2021 08:00:30 +0000.