Which Oil Giant Generates The Most Cash?

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By Tsvetana Paraskova

As the oil supermajors surpassed estimates with strong Q4 and 2018 earnings, Shell beat Exxon—for a second year running—to affirm itself as Big Oil’s biggest cash flow generator.

Shell, which took Exxon’s cash crown with its 2017 earnings, continues to generate more cash flow than the U.S. supermajor, and analysts expect the Anglo-Dutch group to keep its lead in 2019, 2020, and 2021 as well. Exxon, however, has started to catch up as it invests in growing its production in new oil and gas production.

Unlike Shell—and all of the Big Oil pack—Exxon has been growing capital expenditures over the past two years as it looks to seize favorable opportunities to boost production, profits, and cash flows. While Shell and the rest of Big Oil continue to vow strict capital discipline amid fluctuating oil prices, Exxon raised its 2018 capital expenditures (capex) from the previous year and will further boost investments in 2019.

Shell, for its part, has been boosting cash flows in recent years thanks to its acquisition of BG Group completed in 2016.

So the two major cash flow generators among Big Oil have adopted different approaches to boosting cash—a closely watched metric not only by analysts but also by shareholders who now want supermajors to reward them with more returns for having stuck with them in 2015-2016 through one of the worst industry downturns in recent decades.

For 2018, Shell reported cash flow from operating activities of US$53.085 billion, up by a whopping 49 percent compared to 2017.

Exxon said that its 2018 cash flow from operating activities was at its highest level since 2014. At US$36.014 billion, cash flow from operating activities was still way below Shell’s cash generation.

According to estimates from HSBC, reported by Reuters’ Ron Bousso, Shell will continue to be the king of cash flows among the five supermajors—Shell, Exxon, Chevron, BP, and Total—at least through 2021, but Exxon is set to shorten Shell’s lead.

While Shell and other majors stick to capital discipline, Exxon is boosting investments to grow production.

Shell’s capital investment in 2018 stood at US$24.779 billion, slightly up from US$24.006 billion for 2017.

“We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns,” chief executive officer Ben van Beurden commented in Shell’s results release.

Exxon, on the other hand, boosted its capital and exploration expenditures last year by 12 percent annually, to US$25.9 billion from US$23.080 billion, “including incremental spend to accelerate value capture,” the U.S. supermajor said.

Exxon is betting big on the Permian, where it has vowed to triple its production by 2025 and expand infrastructure, as well as on its star oil discoveries offshore Guyana and projects in liquefied natural gas (LNG).

A few days after the 2018 results announcement, Exxon said that together with its partner Qatar Petroleum, it had made a final investment decision to proceed with development of the Golden Pass LNG export project in Sabine Pass, Texas. The project, worth more than US$10 billion, is expected to start up in 2024.

Speaking on the Q4 earnings call, Exxon’s chairman and chief executive officer Darren Woods said that Exxon would be boosting capital expenditures this year compared to last year.

“As I just said, going into 2019 we expect to be around 30 billion and that does reflect the progress and the opportunities that we’re seeing in Guyana, the upside that we’ve seen there as well as the Permian,” said Woods.

In divestments, Shell achieved last year its target to sell US$30 billion worth of assets, and Exxon is now looking to accelerate its asset sales as well.

“So I would expect to see more activity in divestments in the upstream side of the portfolio. That’s going to be driven really by the opportunities that the market brings. We’ve got I think a pipeline of assets that we think would make sense to market,” Exxon’s Woods said on the earnings call.

“We’re not trying to hit some schedule associated with it. We’re really trying to make sure that we can realize the maximum value out of the assets that we have in our portfolio,” he noted.

Exxon and Shell are both raising cash flows from the 2016 lows, but they have different strategies to achieve their goals.

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