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Profits Over ESG as Supermajors Pivot Back to Their Core Business

Europe's supermajors are doubling down on their core business, returning cash to shareholders and considering relocation to the United States to boost their valuations. Shell, BP, and TotalEnergies are rediscovering themselves and activist investors are not liking it-but everyone else is.

Three years ago, Big Oil supermajors in Europe were all about the energy transition and pivoting from their core business to a greater diversification into things like wind, solar, EV charging, biofuels, and all things non-hydrocarbons.

At the time, the supermajors were trying to capture a portion of the emerging ESG investor sector, competing against pure-play transition players riding the highway of government support and urgent activist calls for a shift away from oil and gas.

Now, in just three short years, this has changed. The energy crunch in Europe that began in late 2021 and unfolded to spectacular proportions in 2022 dealt a blow to ESG investing and reminded the world of investing what it's all about: money.

In its latest financial report for the first quarter, BP indicated it might not stick to a plan to reduce its oil and gas production by a quarter to 2 million barrels of oil equivalent daily by 2030. The plan, first announced by former CEO Bernard Looney in 2020, was amended last year as BP realized its push into transition tech was not bringing in money. Now, Looney's successor, Murray Auchincloss, said the company may hit this target or it may not. Related: Eni Looks to Spin Off Oil and Gas Projects

"Two million (boed) is a decent number to stick by right now. Could it be higher? Yes. Could it be lower? Yes," he said, pointing out BP was taking a pragmatic, "returns-based" approach, "that will help inform what we think our production will be in 2030, but I am focused on returns and cash flow, not volume," he said, as quoted by Reuters.

Shareholders in the company would certainly be pleased to hear this-except the activist ones who have been trying to get BP and its peers to shrink their core business further. But these activist investors have been getting less support from other shareholders in further evidence that the tide is turning for oil and gas majors. Investors tried ESG. It didn't perform as advertised. Now they're back to oil and gas, and they want their cash. So Big Oil is delivering.

BP reported a drop in net profits for the first quarter because of lower natural gas prices but kept its share buyback plan unchanged, at $3.5 billion worth of stock to be bought back over the first half of the year.

Shell, conversely, reported a surge in its first-quarter net profits. But it, too, kept its share repurchase target unchanged despite suggestions from analysts it could buy back more shares. CEO Wael Sawan explained that the buyback plan was part of a strategy rather than a race to return as much cash to shareholders in the shortest time possible.

"This is our tenth quarter in a row that we have been buying back $3bn-plus [of shares]. This is about a steady ability to be able to do this over multiple quarters. And it's not just that we want to be buying back at a $90 or $85 oil price, we need to also think about how we can be buying back shares at $50 [oil]," he said, as quoted by the FT, at the release of Shell's first-quarter results.

Europe's third supermajor, TotalEnergies, is deploying the same strategy: keep shareholders happy but do not overindulge them. After reporting net income affected, like BP's, by lower gas prices, the company reiterated its previous plans for share buybacks and investments for the year, with most of the investments going into oil and gas projects.

Separately, CEO Patrick Pouyanne urged political leaders to accept the fact that the world will continue using growing amounts of oil in the future, signaling that Big Oil major knows where its money comes from and even though it is investing heftily in transition projects, most of its investments are in its core business areas of oil and gas.

TotalEnergies is keeping its budget for transition-related investments unchanged. Shell has revised its medium-term target from 23% of total investments to 19% by 2030. BP is being deliberately ambivalent. Europe's Big Oil majors are reversing the course from three years ago-because they have some catching up to do with their U.S. peers. Those have been much slower to embrace the transition and they have been rewarded with higher stock prices.

It might seem counterintuitive against the background of political and activist calls for more focus on the transition and more pressure on energy companies to acquire that focus. Yet, this background is in the realm of narratives. In the real world, oil and gas sell, and their producers make money. It is a simple lesson that Europe's Big Oil had to be reminded of, but it re-learned it fast.

By Irina Slav for

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Irina Slav

Irina is a writer for with over a decade of experience writing on the oil and gas industry. More