* Spending on new fields seen peaking
* Costs driving worry over capacity to pay dividend
* Analysts grumble about lagging stock prices
By Andrew Callus and Anna Driver
LONDON/HOUSTON, Oct 31 Oil industry shareholders
concerned about poor returns and costly projects urged
executives from Big Oil this week to return cash to shareholders
- and at least one of the world's top five petroleum companies
As they posted third-quarter results, the leading oil
companies vowed to control spending and to put cash in the
pockets of investors through asset sales, share buybacks or
dividends while analysts grumbled about lagging stock prices.
BP Plc, the smallest of the group of five, was the
most aggressive. It raised its dividend, cut back capital
spending plans, and ramped up its asset sales target to $10
billion over the next two years from between $4 billion and $6
billion previously - cash that will also go back to
Its shares have risen 6.8 percent since Monday's close.
"At the moment the market likes oil companies that cut back
on expenditure and pay out big dividends," said Malcolm
Graham-Wood, analyst and adviser at VSA Capital.
The other companies - Exxon Mobil Corp, Chevron Corp
, Royal Dutch Shell Plc and Total SA -
acknowledged spending heavily to prevent output from falling but
stopped short of major changes.
Exxon indicated its capital expenditures may subside next
year after planned spending of $41 billion this year. It said it
has returned $5.8 billion to shareholders in the third quarter
through dividends and share repurchases, but did not raise its
The top five have all badly underperformed the global MSCI
World index this year, which is up 20.6 percent
for the year to date, even with share buybacks already under
The weakest performers are Exxon, whose shares have managed
just a 2.6 percent rise, and Shell, down 5.8 percent.
Doug Leggate of Bank of America Merrill Lynch said on
Exxon's results call that its "share price has frankly been
David Rosenthal, Exxon's vice president of investor
relations, responded by saying, "we are executing on the things
that we can control."
Spurred on by historically high oil prices in the past few
years, integrated oil companies have increased exploration work
in areas once deemed too risky.
France's Total, which embarked on a so-called high-risk,
high-reward exploration strategy to find massive fields in areas
such as the southern African seas, conceded last month it would
start what CEO Christophe de Margerie called a "soft landing" in
Total said it would pay a quarterly dividend of 0.59 euro
per share, unchanged from the previous quarter.
Asked why the group did not raise its dividend this quarter
like BP, Total said: "It's not because there are expectations
that we have to dance to the market's tune."
WAVE OF ACTIVISM IN INDUSTRY
Thomson Reuters data shows there have been pushes for
shakeups at 15 different energy companies in the first 10 months
of this year - on pace for the industry's highest number of
activist situations in the past decade.
Targeted companies have included Chesapeake Energy Corp
, Hess Corp and Transocean Ltd.
Members of Big Oil have not been hit by the wave of
shareholder activism that has struck the energy industry this
year, but executives are aware of the pressure.
Shell's finance director, Simon Henry, warned about the
risks of short-term thinking that is gripping the industry -
even though Shell is itself buying back $5 billion worth of
stock this year and paying out $11 billion in dividends after
raising its payout at the end of 2012.
"Those who are cutting capex are being very highly rewarded
... 10-15 years ago the entire industry cut capex, obsessed by
returns and with the market egging them on, but cutting
investment is one of the reasons we've got a $110 oil price," he
told reporters after third-quarter results.
Shell, which also said capex would peak this year, was among
the cutters last time around as the industry retrenched 10-15
years ago, sacking engineers and pulling back from investments
to an extent that made it hard to respond to an upturn.
The company ended that period with a damaging reserves
downgrade in 2004 from which it took years to recover.
"What you're seeing is more of an olive branch being put
forward by names like BP and Total than Shell in recent
quarters," said Nomura analyst Theepan Jothilingam, "but one
needs to be careful about being positioned for the long term in
terms of the right balance between investing for the future and
cash return today."
Reduced spending by the top companies could be bad news for
the service firms that provide rigs and help engineer new
projects, although French services group Technip on
Thursday brushed aside those concerns.
"I think this discipline will be applied to investments (in
the downstream), and that it remains still very positive for
investments in exploration and production," said Chief Executive
The third-quarter results themselves were a mixed bag, with
BP and Total beating analysts'
expectations, Shell missing, and Exxon landing
in line. Weak refining margins - well flagged by
the industry - reduced profit across the board compared with a
year earlier. Chevron's results are due out on Friday.