- Aug 23, 2021 4:55 pm GMT
The last three months earnings in oil & gas sector has lent further support to the industry’s efforts to pay down debt and reward investors. But some long-term investors have concluded that the old energy of the past — oil and gas extraction, is just that — old, with a sell-by date that is moving closer by the day.
TRENDS TO WATCH
- The world’s largest oil and gas majors are seeking to lure back investors by returning more cash to shareholders,
- The Super-majors are seeing a “very strong” cash flow following a sustained rebound in oil prices, but many are choosing to keep spending relatively tight rather than invest in future production projects.
- The US & European super majors, all have announced share buyback or increased dividend payout
- Analysts and market participants, particularly those looking to the long term, remain highly skeptical.
- Energy analyst are warning of continued uncertainties and increased shareholder activism, investor skepticism and intensifying pressure to massively reduce fossil fuel use.
- Institutional investors, once determine that demand has peaked — which likely has already happened — they will abandon the sector permanently
- Savvy long-term investors would shy away from oil and gas majors “unless and until” they fully acknowledge the climate crisis and take necessary actions
- At 2C climate target 59% oil & gas assets will be stranded (remain in ground); at 1.5C nearly 84% will be stranded. Investors don’t want to be left holding the bag.
- The recent IEA findings that no additional oil & gas infrastructure is possible to meet a 1.5 [degrees Celsius] scenario. U.N. Secretary-General, António Guterres, described the report’s findings as a “code red for humanity,” and said it “must sound a death knell” for coal, oil and gas. Energy majors are still overwhelmingly reliant on oil and gas revenues for their earnings — a concept that is irreconcilable to the demands of the climate emergency.
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