Oil Giants on Edge: Record-Breaking Shareholder Payouts Face the Chopping Block

preCharge News BUSINESS — After a year of historic payouts to shareholders, the world’s largest energy companies now face a stark reckoning. A deepening decline in crude oil prices—down more than 12% year-to-date—is squeezing profits, raising doubts over whether Big Oil can maintain its aggressive buyback and dividend programs.

For years, companies like Shell, ExxonMobil, Chevron, and BP have leaned heavily on share repurchases to reward investors and buoy stock prices. But with cash inflows shrinking and economic uncertainty rising, analysts warn that the era of soaring shareholder returns may be running out of fuel.

“Few Economically Attractive Options” Remain, Analysts Say

Espen Erlingsen, head of upstream research at Rystad Energy, summed up the shift bluntly: “Companies have few economically attractive options that allow for reinvestment and generous shareholder returns at the same time.”

In a research note published Thursday, Erlingsen flagged the tension between capital discipline and falling revenues. He warned that companies pushing forward with large buyback programs in this market environment could soon be forced to pivot.

“Share buybacks are more flexible than dividends and are likely to be the first lever pulled,” he noted. “If oil prices stay low, adjustments are inevitable.”

And it’s not just analyst speculation. BP has already blinked—cutting its buyback to $750 million, down sharply from $1.75 billion the previous quarter, after reporting a plunge in first-quarter profits and a significant rise in net debt.

Record Payouts in 2024 May Prove Unsustainable in 2025

In 2024, shareholder rewards from oil majors Shell, BP, TotalEnergies, Eni, Chevron, and ExxonMobil reached a staggering $119 billion, eclipsing the previous record set in 2023. According to Rystad, the payout ratio—which compares shareholder distributions to operating cash flow—spiked to 56%, well above the industry’s historical range of 30% to 40%.

Maintaining that level into 2025, Rystad estimates, would mean over 80% of cash flow would need to be returned to shareholders—an approach many see as fiscally unsound, especially amid volatile market conditions.

European Majors May Be First to Flinch

Analysts at Bank of America were among the first to ring the alarm bells. In a note titled “Bye-bye buybacks?”, the firm cautioned that European oil majors like BP, Repsol, and Eni are most at risk of scaling back shareholder returns due to already stretched balance sheets.

Only a handful of companies—Shell, TotalEnergies, and Equinor—appear poised to maintain buyback programs at their current pace, according to the report.

When contacted by preCharge News, Repsol and Eni did not comment on whether they plan to modify their capital return strategies.

BP at the “Point of Maximum Weakness”

For BP, the challenges are stacking up fast. Not only is its cash flow shrinking and debt climbing, but takeover speculation has returned to the table. Still, analysts remain cautiously optimistic.

Lydia Rainforth, head of European energy equity research at Barclays, said the next six months are critical. “If there’s a point of maximum weakness for BP, it’s now,” she told preCharge News. “Debt continues to rise, and production will fall until mid-2026.”

However, there may be a light at the end of the tunnel. Rainforth predicts that strategic divestments, including a potential sale of BP’s lubricants division—valued at up to $15 billion—could ease debt pressure and unlock capital for future growth.

“Once debt comes down and cost savings materialize, production growth could start kicking in next year,” she added.

A New Phase for Energy Stocks?

Investors, long used to energy companies as dividend champions, are now recalibrating expectations. Slumping oil prices, tighter balance sheets, and macroeconomic uncertainty could force a broader rethink of Big Oil’s capital allocation priorities.

For now, the majors are holding their ground. But if the current downturn deepens, analysts say buybacks will be the first casualty, followed by dividend trims—moves that could ripple through markets already jittery over inflation, interest rates, and global demand.

The only certainty? 2025 won’t look like 2024.