BAKU, Azerbaijan, Dec.16. Major European oil and gas companies will have strong performance across both upstream and downstream segments in 2023, due to high O&G prices and reduced supplies of refined products, especially diesel, from Russia, partially offset by a weaker macroeconomic backdrop, Trend reports with reference to Fitch Ratings.
The latest report from Fitch Ratings says that while chemicals operations are likely to be negatively affected by high gas prices, their underperformance should be more than compensated for by continued strong performance in other segments.
“We expect Shell plc, Eni SpA, BP plc, and TotalEnergies SE to continue to have strong post-dividend FCF generation in 2023, based on our O&G price assumptions, alongside normalized levels of refining margins. While increasing shareholder distributions and higher taxes will partially offset strong performance, capex remains disciplined and companies remain focused on cost control. O&G majors adopted more flexible financial policies to help better navigate the pandemic, but dividends and buybacks are being increased over and above existing policies as they have not fully tracked record earnings in 2022. For example, Shell has increased 4Q22 dividends a share by 15 percent against the target 4 percent annual growth outlined in its policy and Eni has increased its initial EUR1.1 billion buyback for 2022 to EUR2.4 billion,” says the rating agency.
Therefore, analysts from Fitch Ratings believe further loosening of financial policies may occur throughout 2023, resulting in higher cash distributed to shareholders.
“However, we expect continued positive FCF generation and proceeds from asset sales to still allow majors to maintain low net leverage levels below current positive rating sensitivities.”
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