From The Financial Times, October 13:
Oil valuations: gushing cash flows are not being reinvested
Companies are spending free cash flow on reducing debt and buying back stock
The US-Saudi scuffle has boosted oil prices. Oil is hovering around $95 a barrel, not far off where it was a decade ago. European oil stocks, however, are pricing in a whole different world. Back then, the Euro Stoxx oil and gas index traded at 10 times forward earnings. It is now at five times — at least in part because fossil fuels are widely perceived as on their way out of the energy mix.
Oil companies read low valuations as a signal to reduce investments in all but the very best new oilfields. Indeed, their capital expenditure has fallen a third over the past decade, according to Goldman Sachs. Or, put another way, Bernstein has calculated that the 50 largest listed oil and gas companies have cut capex from 2.3 times depreciation a decade ago to less than depreciation today. Instead, they spend free cash flow on reducing debt and buying back stock....
....MUCH MORE
Last year's exploration and capital expenditures were $525 billion lower than they were in 2014.
At the risk of being repetitious (repetitious, moi?) here's something we've been pointing out for a while (including a few hours ago):
....Here's part of our outro from that January 2022 post "The Lack Of Prospects For ESG (at the moment)":
....ESG is currently over-owned, oil & gas under-owned in light of the fact that 10 years of "stranded asset" talk (yes, it's been a decade) from the intro to a 2016 piece*:
Since 2012 when the Carbon Tracker Initiative came up with the idea as a pitch to keep hydrocarbons in the ground we've been kicking around in-house what, if any, effects the the carbon bubble/stranded assets arguments will have on price, and to this day don't have a clear-cut answer for patient reader.Well, six years later we have a bit more clarity, oil companies have been putting money in shareholder's hands rather than in the ground, nothing dramatic, on a year to year basis but on a decadal scale it's hundreds of billions/trillions that didn't go into exploration.....
