CapEx by Big Oil Turns Around?
August 29, 2023
Article by Julie
Over the last few years, as a majority of the gargantuan Big Oil profits have been channeled into shareholder payouts, we have been lamenting the insufficiency of capital investment being made by Big Oil. As citizens and as developers, we have been frustrated by the decisions to de-emphasize reinvesting in their core businesses. But the investment community has applauded these moves translating into buoyant stock prices and huge C-Suite rewards. However, the Wall Street Journal ran a very interesting article on August 14, 2023 (see here) citing statistics that point towards a turnaround back toward investing in the core businesses. Recent statistics are eye-opening. For example, the cash hoard built by large oil reached $85 billion in late 2022 and has since dropped back to about $70 billion as of early 2023. Other statistics show that the percentage of cash deployment in early ’23 that was channeled towards CapEx has migrated from a low of 25% up to around 42%. This encouraging trend reflects a mirror image of reduced debt repayments which was a dominant use of cash as recently as two years ago. Hefty payouts to shareholders continue, at around 40%, but they have topped out. So, the most recent trend toward investing in O&G development certainly bodes well for supply and service companies. We at First Keystone have been assiduously investing all along in O&G support services having built and leased (or sold) three industrial buildings, totaling 14,500 sf, over the last year. In fact, our core business is to lease industrial real estate in Pecos, Texas to O&G service companies. Three new companies have recently joined our community – ChampionX, Spindletop Energy Products, and, most recently, TNT Surface & Supply. All of them serve midstream industries and some upstream, as well.
The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.