NEW YORK: The world’s largest oil companies invested billions of dollars to boost crude production and their success has turned around and bit them — and their shareholders.

Oil majors ExxonMobil Corp, Chevron Corp and Royal Dutch Shell all reported earnings on Thursday and Friday that showed key units significantly underperformed, particularly refining and chemicals. Investor discontent with weak returns, previously concentrated on smaller shale companies or oil services firms, has worked its way up to the majors.

In the last six months, the broad S&P 500 is up 10.4 per cent, while Chevron shares have lost 8pc, Shell is down 10pc, and Exxon has lost 12pc.

The world’s oil-and-gas giants have been hit by falling oil and natural gas prices, weaker margins in chemicals and refining due to sagging demand, and growing investor discontent with their response to a warming planet.

To keep investors onboard, oil majors are cutting costs and selling billions of dollars worth of assets around the world to focus on new developments and the most profitable businesses.

The global economic slowdown in recent months, amplified by the coronavirus outbreak, has further strained their income, pressuring stock performance.

This quarter is disappointing. These companies need to focus on cutting more cost, selling their most unproductive assets, and returning excess cash to shareholders,” said Kevin Holt, Houston-based manager of Invescos Comstock Fund, which has about $20 billion under management. “They have to do a better job.

Published in Dawn, February 1st, 2020