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Big Oil Books Biggest Cash Flow Since 2008

The world’s five supermajors booked $37 billion in combined cash flows for the fourth quarter as disciplined spending combined with rallying oil prices to take Big Oil’s cash flow to the highest since 2008.

ExxonMobil, Chevron, BP, Shell, and TotalEnergies also booked combined adjusted net earnings of $31 billion for Q4 2021—the highest for any quarter in more than nine years, according to Bloomberg’s estimates.

All supermajors reported very strong earnings and cash flows for Q4 and 2021, as oil and gas prices rallied and global demand returned after the initial slump in the pandemic in 2020.

Exxon posted its largest quarterly profit for Q4 in seven years, while its full-year 2021 cash flow from operating activities jumped to the highest since 2012. Chevron reported for 2021 a record-high free cash flow and its best annual earnings since 2014, thanks to rallying oil and gas prices and the economic rebound last year. BP announced this week what was its highest annual net profit in eight years.

“And certainly, it's possible that we're getting more cash than we know what to do with,” Murray Auchincloss, BP’s chief financial officer said on the earnings call.

“For now, I'm going to be conservative and manage the company as if it's $40 oil. Anything we could get above that just helps, obviously,” Auchincloss added.

In the fourth quarter of 2021, Brent prices averaged just below $80 a barrel, while Brent averaged $96 per barrel the last time the five supermajors had generated so much cash flow—$40 billion for the first quarter of 2008, Bloomberg notes.

Thanks to rallying energy commodity prices, the majors accelerated or announced additional share buybacks and raised dividends throughout 2021 to return more cash to shareholders.  

The bumper profits, especially of UK-based Shell and BP, rekindled calls in the UK for a so-called “windfall tax” on profits of energy companies to be used to mitigate the blow to consumers from soaring energy prices.

BP’s chief executive Bernard Looney said, commenting on the calls for a windfall tax: “if anything, the UK needs more gas, not less gas right now. And that's going to require more investment, not less investment. And a windfall tax isn't probably going to incentivize more investment.”

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By Tsvetana Paraskova for Oilprice.com

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