Big Oil expects big windfall in build-up to week of earnings reports

The decline in commodity prices in the latter part of last year points to a sharp drop in profit in the fourth quarter, compared with the third.

Earnings reports in Europe have been mixed so far this reporting season, with just 46% of companies surpassing expectations, according to Bloomberg Intelligence. That has not halted the equities rally, which has taken its cue more from macroeconomic developments.

Europe’s mild winter may have calmed the worst fears about energy cost inflation, but there is no question 2022 was a blowout year for oil and gas majors, as Shell’s record-beating results last week showed. The company rewarded shareholders with a 15% increase in the dividend and a $4bn (€4bn) buyback.

As rivals BP and TotalEnergies prepare to take up the baton this week, investor appetite for a share of the earnings windfall is voracious, even as criticism of Big Oil’s brimming coffers during a cost-of-living crisis grows.

At the same time, the decline in commodity prices in the latter part of last year points to a sharp drop in profit in the fourth quarter, compared with the third.

Thus BP’s net income is estimated to have fallen about 40% sequentially, according to data compiled by Bloomberg.

Strong production, supported by the restart of its giant oil field Kashagan in the Caspian Sea, is expected to have helped TotalEnergies counter the broader price decline.

For Norwegian peer Equinor, the spotlight will be firmly fixed on its extraordinary dividend and 2023 buyback guidance.

Outside of energy, Dutch payments firm Adyen will reveal how it performed amid a slowdown in consumer spending when it reports on Wednesday. 

Credit Suisse Group's progress with a plan to spin off its dealmaking operations after a series of scandals and billions of losses will be in focus in an update on Thursday.  

Consumer goods giant Unilever, preparing for new CEO Hein Schumacher to take the helm in July, is set to give its fourth-quarter update the same day.

• Bloomberg