Record Breaking Shareholder Payouts Under Threat, Rystad Warns

In a release sent to Rigzone recently by the Rystad Energy team, Rystad warned that “record breaking shareholder payouts are now under threat as [the] oil price hovers at $60 [per barrel]”.

“Western energy supermajors are faced with an increasingly difficult challenge – either keep their promise of returning ever-higher shareholder returns or risk spurning investors to save their balance sheets,” the company stated in the release.

Rystad noted in the release that record cash has been allocated to shareholders, but added that, with recent double-digit dips in oil prices not reversing, these payouts will be increasingly difficult to maintain. The company estimated in the release that the majors “will likely need to reduce both investment and shareholder payouts to balance their cash flows in the current oil price environment”.

Total shareholder payouts by BP, Chevron, Eni, ExxonMobil, Shell, and TotalEnergies reached $119 billion in 2024, Rystad highlighted in the release, pointing out that this beat the previous record set in 2023.

“The payout ratio – shareholder payouts as a share of corporate cash flow from operations (CCFO) – climbed to 56 percent, well above the 30-40 percent range that was typical from 2012 to 2022,” Rystad said in the release.

“If shareholder payouts remain at 2024 levels throughout 2025, this would imply that companies distribute more than 80 percent of their cash flow to investors, based on first quarter CCFO as a proxy for full-year performance,” it added.

“This would mark a sharp and highly unsustainable jump from the 56 percent payout ratio recorded in 2024. However, many firms have established payout targets tied to CCFO, and based on current cash generation levels, shareholder payouts could fall by 20-40 percent in 2025,” it continued.

Rystad noted in the release that, to keep up with this increasing payout ratio, the majors have been sustaining shareholder payouts in part by drawing down cash reserves.

“Following a peak of nearly $160 billion between the third quarter of 2022 and the first quarter of 2023, aggregate cash reserves have steadily declined, reaching just above $120 billion as of the first quarter of 2025,” Rystad highlighted.

“If current payout levels are sustained throughout the year, total shareholder payouts could again reach $119-$120 billion in 2025, matching the record set in 2024,” it added in the release.

Rystad warned in the release, however, that there are several downside risks to this estimate.

“First, maintaining these payout levels would imply that the majors are distributing over 80 percent of their cash generation, based on first quarter 2025 CCFO as a proxy for full-year performance,” it said.

“Second, the recent decline in oil prices – now hovering around $60 per barrel – could force the majors to make a difficult choice between cutting buybacks, which would be unpopular with investors, or using their balance sheets to support current repurchase levels,” it added.

“Third, several companies have formal payout ratio targets linked to CCFO. For example, BP, Eni, and TotalEnergies have stated targets shareholder returns of 30-40 percent of CFFO, while Shell targets 40-50 percent,” it continued.

“Applying these payout targets to current cash flow levels, total shareholder payouts could fall by approximately 20 percent to 40 percent from $119 billion to around $70 to $95 billion in 2025,” Rystad projected in the release.

Espen Erlingsen, Head of Upstream Research at Rystad Energy, said in the release, “recent market volatility has left the majors with few economically attractive options that both allow for reinvestment while maintaining a competitive capital returns framework”. 

“As companies like Shell and ExxonMobil continue to push ahead with large-scale buyback programs despite shrinking cash inflows, the durability of these strategies is in question,” Erlingsen added.

“For now, the majors are holding the line. But if oil prices remain depressed, adjustments may be inevitable. Buybacks – typically more flexible than dividends – are likely to be the first lever pulled,” Erlingsen continued.

The Rystad head went on to highlight in the release that “all the majors have thus far upheld their shareholder payout guidance, despite weakening market fundamentals”.

“Shareholders have been accustomed to a stronger commodity price environment over the last few years, and recent market shocks will undoubtedly have a lasting impact on payout levels and investor expectations,” Erlingsen noted.

“Although the drop in oil prices creates downside risk for shareholder returns, the majors will remain reluctant to scale back their capital returns framework in the near-term,” Erlingsen went on to state.

Shell, BP, TotalEnergies

Rigzone contacted Shell, BP, TotalEnergies, Eni, ExxonMobil, and Chevron for comment on Rystad’s release. Shell declined to comment. None of the other companies have responded to Rigzone at the time of writing.

In capital markets day 2025 slides posted on Shell’s website back in March, Sinead Gorman, Shell’s Chief Financial Officer, said, “our dividend remains a financial priority, and our confidence in sustaining a progressive approach is well supported, with our dividend breakeven at around $40 per barrel”.

“Additionally, given that we view share buybacks as an attractive use of our cash, we will continue to allocate capital towards buybacks, even at a $50 per barrel world utilizing our balance sheet strength if necessary,” Gorman added.

In its first quarter 2025 results statement, which was posted on its website in April, BP said, “our policy is to maintain a resilient dividend”.

“Subject to board approval, we expect an increase in the dividend per ordinary share of at least four percent per year. For the first quarter, BP has announced a dividend per ordinary share of eight cents,” it added.

“Share buybacks are a mechanism to return excess cash. When added to the resilient dividend, we expect total shareholder distributions of 30-40 percent of operating cash flow, over time,” it continued.

“Related to the first quarter results, BP intends to execute a $0.75 billion share buyback prior to reporting the second quarter results. The $1.75 billion share buyback program announced with the fourth quarter results was completed on 25 April 2025,” BP went on to state.

In a statement made during a meeting with TotalEnergies’ board of directors on April 29, TotalEnergies CEO Patrick Pouyanne said, “confident in the company’s ability to reach its 2025 underlying growth objective and taking into account the strength of its balance sheet … the board of directors has confirmed the distribution of the first interim dividend of EUR 0.85/share for fiscal year 2025, an increase of 7.6 percent compared to 2024 and consistent with the attractive dividend growth guidance announced in February”.

“Furthermore, it has also decided to again continue share buybacks for up to $2 billion in the second quarter despite a softening price environment with Brent below $70 since the beginning of April and an uncertain geopolitical and macroeconomic context,” he added in the statement, which was included in the company’s first quarter 2025 results statement that was posted on the company’s site on April 30.

Eni, ExxonMobil, Chevron

In a statement posted on its site on May 16, Eni announced that, “following the authorization granted by the Shareholders’ Meeting held on 14 May 2025”, a new share buyback program would be launched “in the next days”.

“The new Share Buyback Program, to be executed by April 2026, will concern up to a maximum of 315 million of Eni’s shares (approximately 10 percent of share capital), up to a total maximum of EUR 1.5 billion, as announced on 27 February 2025 in the context of the Capital Markets Update,” it added.

“This amount may be increased up to a total maximum of EUR 3.5 billion, in case of upside scenarios of the Cash Flow From Operations,” it continued.

“The new Share Buyback Program will have the purpose of paying to the Shareholders an additional remuneration compared to the distribution of dividends, therefore, the treasury shares acquired will be cancelled without reduction of the share capital, by July 2026, in accordance with the resolutions of the Shareholders’ Meeting held on 14 May 2025,” it went on to state.

In a statement posted on its site on May 14, Eni revealed that a meeting of its shareholders resolved to “approve the distribution for, and in place of, the payment of the dividend relating to financial year 2025 of a sum of EUR 1.05 per share in tranches”. In its first quarter results statement, which was posted on En’s site in April, the company highlighted a “five percent increase in FY ’25 dividend to EUR 1.05 per share”.

Also in its first quarter results statement, Eni said adjusted cash flow before working capital was EUR 3.4 billion, “significantly covering gross capex of EUR 1.9 billion”.

“The resulting free cash flow of EUR 1.5 billion and the proceeds from the portfolio management of about EUR 3 billion, mainly relating to the closing of the KKR 25 percent investment in Enilive, funded EUR 1.2 billion of cash returns to shareholders (including the third instalment of the 2024 dividend for EUR 0.76 billion) and contributed to reduce net borrowings of almost EUR 1.8 billion to EUR 10.3 billion from 2024 year-end,” Eni added in the statement.

Eni CEO Claudio Descalzi said in the company’s first quarter results statement, “we remain financially disciplined and resolute on leveraging our competitive advantages built on exploration, proprietary technologies, and innovative business models, to deliver transformation and generate value for our shareholders”. 

In its first quarter results statement, which was posted on its site earlier this month, ExxonMobil highlighted that “shareholder distributions of $9.1 billion included $4.3 billion of dividends and $4.8 billion of share repurchases, consistent with the company’s announced plans”.

The company’s chairman and CEO, Darren Woods, said in that statement, “in this uncertain market, our shareholders can be confident in knowing that we’re built for this”.

“The work we’ve done to transform our company over the past eight years positions us to excel in any environment,” he added.  

In Chevron’s first quarter 2025 statement, which was also posted on the company’s site earlier this month, Chevron highlighted that it returned $6.9 billion of cash to shareholders during the quarter, including share repurchases of $3.9 billion and dividends of $3.0 billion.

The company added in the statement that its board of directors declared a quarterly dividend of $1.71 per share, payable June 10, 2025, “to all holders of common stock as shown on the transfer records of the corporation at the close of business on May 19, 2025”.

In that statement, Mike Wirth, Chevron’s chairman and chief executive officer, said, “this quarter reflected continued strong execution and progress on our objective to deliver superior shareholder value”.

“Over the last three years, Chevron has returned more than $78 billion of cash to shareholders,” he added.

“Despite changing market conditions, our resilient portfolio, strong balance sheet, and consistent focus on capital and cost discipline position us to deliver industry-leading free cash flow growth by 2026,” he continued.

To contact the author, email andreas.exarheas@rigzone.com