Sacrosanct Dividends | Russell T. Rudy Energy LLC
“Rigzone” reports that despite the crude oil price collapse and dramatic cutbacks in spending, the major international oil companies are either maintaining, or increasing, their dividends paid to shareholders. The majors are willing to fire workers, cancel drilling, postpone production and sell assets in order to raise enough cash to pay dividends.
ExxonMobil Corp., the world’s largest explorer, will increase its dividend for the 33’rd year in a row. Analysts project that this will cost the company $12 billion this year. Chevron Corp. is following the same strategy and increasing its payout to investors for the 28’th straight year, at an annual cost of $8.1 billion. The company’s Chief Financial Officer, Patricia Yarrington, has indicated that there is no relationship between crude prices and dividend payouts. In terms of profit, both Exxon and Chevron had their worst third quarters in decades.
This commitment to dividends at all costs is not confined to Exxon and Chevron. The UK’s BP Plc., Norway’s Statoil ASA, ConocoPhillips and Occidental Petroleum Company are all following suit. Statoil has cut $1 billion in investments previously anticipated in this year’s budget and has postponed the startup of the Aasta Hansteen and Mariner fields from 2017 to late 2018 in order to protect its dividend. Occidental has frozen salaries, capped bonuses, offered voluntary severance packages, and is selling its corporate aircraft and hangar to raise cash.
Economist Philip Verleger, formerly with the Council of Economic Advisors, observed “These companies are no longer viewed as growth companies; they are viewed as sources of income to pension funds and retirees. If they cut the dividend, their share prices would plummet.” However, he went on to say that cutting investments in order to pay dividends, could eventually lead to production shortfalls and sharply higher prices.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=141334&utm .
