London — Top oil and gas companies are watching the worsening global economic outlook with trepidation, but they currently appear to be doing little to correct course in the face of the approaching storm.
The level of uncertainty in global energy markets has shot up in recent months due to U.S. President Donald Trump’s tariffs flip-flops, stop-start negotiations over the Ukraine conflict, tightening sanctions on Iran, and growing signs of disagreement among OPEC and other major producers.
Crude prices have fallen by around $20 since the start of the year to $62 a barrel, significantly below the price energy majors need to maintain their spending plans while also delivering elevated shareholder returns without borrowing.
Probably of more concern to companies is a slump in long-term prices, shifting into a structure known as contango, where contracts starting in January 2026 trade below those further out, indicating weaker demand.
Executives are well aware of the worsening environment.
“We have indeed entered into a period of heightened macroeconomic and geopolitical uncertainty,” TotalEnergies CEO Patrick Pouyanne said on a call with analysts on Wednesday.
This “fluid landscape” is muddying the outlook for oil demand and operating costs while increasing volatility, he said, adding, however, that there is no need for now to panic or overreact.
Indeed, there is little to suggest companies have any plans to change their behaviour just yet.
Exxon Mobil, the largest U.S. oil and gas producer, maintained its guidance for 2025 spending in a range of $27 billion to $29 billion, while TotalEnergies, Shell and Chevron also stuck to previous forecasts.
BP, which is facing a deep crisis, did reduce its planned annual spending by $500 million to $14.5 billion, with CEO Murray Auchincloss saying that could be cut by a further $2.5 billion if needed, a staggering figure that could lead to a contraction in production.
BUSINESS AS USUAL
Basic household economics suggests that when times get tough – and could get tougher – it’s wise to cut back on costs and avoid borrowing. Therefore, one of the most telling signs of Big Oil’s “business as usual” stance is that companies have opted to take on more debt in order to maintain share buybacks and dividends.
Shell and TotalEnergies maintained steady rates of share buybacks in the first quarter of $3.5 billion and $2 billion, respectively, despite the weakening outlook. In the same period, Exxon paid $4.3 billion in dividends and repurchased $4.8 billion in shares, putting it on track to meet an annual share repurchase goal of $20 billion.
Chevron plans to reduce the rate of share buybacks in the second quarter but overall aims to spend between $11.5 billion and $13 billion this year. While BP has cut share purchases, that is a reflection of its own problems, rather than industry-wide conditions.
Overall net debt for the five companies rose in the first quarter of 2025 to $153 billion from $129 billion in the final three months of 2024.
TotalEnergies’ net debt nearly doubled to $20.1 billion, while Chevron’s rose by 41% to $25 billion. Debt loads at BP, Shell and Exxon rose more modestly.
The companies’ debt-to-market capitalisation ratio remains relatively low, with the exception of BP. But the group would need an oil price of around $80 or more in order to organically meet their dividend and share buybacks programmes in 2025, according to RBC Capital Markets.
DARK CLOUDS
One could argue the response is reasonable. Large companies with strong balance sheets should not make knee-jerk reactions to periods of uncertainty. And keeping shareholders happy with strong returns is an understandable goal which executives would be loan to roll back, especially given the long-term issues the industry faces.
Yet these companies, which produce, refine, trade and sell huge volumes of oil and gas, are highly sensitive to changes in global economic activity and energy demand.
While it is impossible to predict how Trump’s tariffs and the U.S. trade war with China will ultimately pan out, there is little doubt that global economic activity will take a hit in the coming months.
The International Energy Agency last month sharply cut its global oil demand forecast for 2025 to 730,000 barrels per day from the 1.03 million bpd it projected the previous month.
It would therefore be prudent for oil companies and investors to prepare for a significant deterioration in earnings. But for now, though, it appears executives are sticking to business as usual.
Ron Bousso; Editing by Kirsten Donovan – Reuters
