Reporting season: oil and gas sector back with a vengeance

Global majors, whose financial results we analyze on a regular basis, are traditionally the ones to start the reporting season in the oil and gas sector[1]. While Russian companies were selling crude and petroleum products at a discount resulting from geopolitical pressure, global corporations in Q2 2022 feasted on the victorious return of fossil fuel.

During that period, total net profit of the five global supermajors quadrupled y-o-y (see Fig. 1) to almost $63 billion, thanks to the soaring prices (up 60% and 260% y-o-y for oil and gas, respectively, and almost 100% for light petroleum products in the European market). The growth vs. the previous quarter is phenomenal (up 17 times across the five companies) and is due to the low base effect of the prior period when the majors were writing off their Russian assets. In the first six months of 2022 these players came up with double net profit vs. H1 2021.

Note that US companies, which kept to traditional business strategies despite pressure from the climate change agenda in the last year, rose in the S&P 500 ranking in Q2 2022 in terms of free cash flows by more than a few points. ExxonMobil, for one, outpaced Alphabet for the first time since 2015, having finished third after Apple and Microsoft. Chevron is in fifth place (see Fig. 2)[2].

It’s no wonder then that oil and gas majors beat Big Tech in terms of capitalization growth rate, seeing that the former's total market value has increased by 28% since the beginning of the year, while the latter’s has fallen by 16%[3]. The most visible growth was demonstrated by US companies (see Fig. 3). All we have to do is look forward to Saudi Aramco’s results, which should become public within the next two weeks. The Saudi major has come close to Apple, the capitalization leader (see Fig. 4), and even surpassed it in May for some short time.