Top five oil majors set to rake in record $200b profit for 2022

Last year’s record earnings are 50 per cent higher than the previous annual record set more than a decade ago

A crude oil pump jack in the Permian Basin in Loving County, Texas. - Reuters file

The five biggest oil majors in the world are expected to rake in record profits for 2022 of around $200 billion in combined yearly earnings in the coming days, thanks to the jump in oil and gas prices last year, according to early estimates compiled by S&P Capital IQ.

Last year’s record earnings are 50 per cent higher than the previous annual record set more than a decade ago, oil market analysts say.

However, in 2023, earnings of the top five — ExxonMobil, Chevron, BP, Shell, and TotalEnergies — are set to be around a quarter lower than the combined profits for 2022, but they will still be a massive $150 billion for 2023, analysts said, citing factors such as fears of an economic slowdown, plunging natural gas prices, cost inflation and uncertainty over China’s re-opening are dimming the outlook for 2023.

Shares of the five super-majors are up at least 18 per cent since Russia’s invasion despite an 11 per cent drop in the price of crude. The top ten performers in the S&P 500 last year were all energy companies, with Exxon advancing 80 per cent for its best annual performance on record. Oil companies now generate about 10 per cent of the index’s earnings, despite making up just 5.0 per cent of its market value, according to data compiled by Bloomberg.

“Investors are attracted to a lot of the characteristics this sector has to offer now,” said Jeff Wyll, a senior analyst at Neuberger Berman Group, which manages about $400 billion. “It was trying to be a growth sector and that failed. It reinvented itself as a cash distribution and yield play, which is attractive in this environment.”

Analysts at Standard Chartered believe growing oil demand could sustain prices at $90 per barrel but sustained prices above $100 per barrel are unlikely in 2023.

Energy experts at Energy Intelligence Group have predicted that not only will oil demand grow in 2023 but it will continue doing so till the end of the decade.

After an initial dip, the oil price rally has been a steady grind upwards in the current year, with the last 12 trading days seeing 10 days of higher intraday highs and 11 days of higher intraday lows. Brent is currently trading at $87.50 per barrel — more than $10 from this year’s low. And now commodity analysts at Standard Chartered are saying that positive speculative sentiment in the oil markets can support prices above $90 per barrel. The analysts say that the rally is likely to take Brent prices past $90, though they are not optimistic that the fundamentals are strong enough to sustain prices above $100.

The oil industry, the top performer in the S&P 500 index over the past year, has boosted dividends and share buybacks in recent quarters thanks to the massive cash flows. Its earnings are set to lead the 2022 earnings growth of all 11 sectors in the S&P 500.