Oil majors threaten dividend cuts as crude holds at $60

Falling oil prices strain shareholder returns as supermajors weigh high dividends against cash flow stability.

Share:

International oil majors may be forced to scale back dividend distributions and share buybacks in 2025, according to the latest analysis from Rystad Energy published on May 22. The current oil price, stabilised around $60 per barrel, is challenging the sustainability of shareholder return strategies maintained by Shell, ExxonMobil, BP, Chevron, TotalEnergies, and Eni.

Record payouts become harder to sustain

In 2024, the six leading majors distributed a record $119bn to shareholders, representing a payout ratio of 56% of their Corporate Cash Flow from Operations (CCFO). This level significantly exceeds the historical 30–40% range observed from 2012 to 2022. Should this payout pace continue through 2025, returns could exceed 80% of generated cash flow—an unsustainable threshold unless major adjustments are made.

Some firms have set explicit distribution targets. BP, Eni, and TotalEnergies aim for 30–40% of CCFO, while Shell targets 40–50%. At current cash flow levels, this would imply a potential drop in aggregate payouts to between $70bn and $95bn in 2025, representing a 20–40% decrease compared to current levels.

Declining reserves to uphold payments

To maintain commitments, several companies have drawn from their cash reserves, which fell from nearly $160bn at the end of 2022 to slightly above $120bn in the first quarter of 2025. This gradual decline reflects efforts to sustain shareholder returns despite a drop in net cash inflows, amplified by volatile oil prices.

In this context, share buybacks—more flexible than dividends—are likely to be the first lever adjusted. “If oil prices remain at this level, cuts will become inevitable,” said Espen Erlingsen, Head of Upstream Research at Rystad Energy.

Strategic trade-offs ahead

Supermajors now face a complex trade-off: maintaining market confidence without weakening their financial stability. For several quarters, shareholders benefited from post-pandemic energy price surges, but recent signals point to a sustained downward shift. In a less favourable environment, companies will need to reassess the viability of their current capital return frameworks.

“The current cash flow level does not support sustaining 2024 distribution levels indefinitely,” Erlingsen said. For investors, these anticipated adjustments signal a break from expectations shaped by the high-price environment between 2021 and 2023.

Major oil producers accelerate their return to the market, raising their August quotas more sharply than initially expected, prompting questions about future market balances.
Lindsey refinery could halt operations within three weeks due to limited crude oil reserves, according to a recent analysis by energy consultancy Wood Mackenzie, highlighting an immediate slowdown in production.
The flow of crude between the Hamada field and the Zawiya refinery has resumed after emergency repairs, illustrating the mounting pressure on Libya’s ageing pipeline network that threatens the stability of domestic supply.
Libreville is intensifying the promotion of deep-water blocks, still seventy-two % unexplored, to offset the two hundred thousand barrels-per-day production drop recorded last year, according to GlobalData.
The African Export-Import Bank extends the Nigerian oil company’s facility, providing room to accelerate drilling and modernisation by 2029 as international lenders scale back hydrocarbon exposure.
Petronas begins a three-well exploratory drilling campaign offshore Suriname, deploying a Noble rig after securing an environmental permit and closely collaborating with state-owned company Staatsolie.
Swiss commodities trader Glencore has initiated discussions with the British government regarding its supply contract with the Lindsey refinery, placed under insolvency this week, threatening hundreds of jobs and the UK's energy security.
Facing an under-equipped downstream sector, Mauritania partners with Sonatrach to create a joint venture aiming to structure petroleum products distribution and reduce import dependency, without yet disclosing specific investments.
Oil companies may reduce their exploration and production budgets in 2025, driven by geopolitical tensions and financial caution, according to a new report by U.S. banking group JP Morgan.
Commercial oil inventories in the United States rose unexpectedly last week, mainly driven by a sharp decline in exports and a significant increase in imports, according to the US Energy Information Administration.
TotalEnergies acquires a 25% stake in Block 53 offshore Suriname, joining APA and Petronas after an agreement with Moeve, thereby consolidating its expansion strategy in the region.
British company Prax Group has filed for insolvency, putting hundreds of jobs at its Lindsey oil site at risk, according to Sky News.
Orlen announces the definitive halt of its Russian oil purchases for the Czech Republic, marking the end of deliveries by Rosneft following the contract expiry, amid evolving logistics and diversification of regional supply sources.
Equinor and Shell launch Adura, a new joint venture consolidating their main offshore assets in the United Kingdom, aiming to secure energy supply with an expected production of over 140,000 barrels of oil equivalent per day.
Equinor announces a new oil discovery estimated at between 9 and 15 mn barrels at the Johan Castberg field in the Barents Sea, strengthening the reserve potential in Norway's northern region.
Sierra Leone relaunches an ambitious offshore exploration campaign, using a 3D seismic survey to evaluate up to 60 potential oil blocks before opening a new licensing round as early as next October.
Faced with recurrent shortages, Zambia is reorganising its fuel supply chain, notably issuing licences for operating new tanker trucks and service stations to enhance national energy security and reduce external dependence.
The closure of the Grangemouth refinery has triggered a record increase in UK oil inventories, highlighting growing dependence on imports and an expanding deficit in domestic refining capacity.
Mexco Energy Corporation reports an annual net profit of $1.71mn, up 27%, driven by increased hydrocarbon production despite persistently weak natural gas prices in the Permian Basin.
S&P Global Ratings lowers Ecopetrol's global rating to BB following Colombia's sovereign downgrade, while Moody’s Investors Service confirms the group's Ba1 rating with a stable outlook.