Oil and gas majors remain committed to dividends despite price plunge: Report

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Major oil and gas companies remain committed to paying shareholder dividends despite suffering due to a historic oil price plunge as a result of the coronavirus pandemic, according to a report from data company GlobalData.

Oil prices have fallen off a cliff since the year began, with prices down over 50 percent. Energy companies have suffered as a result, with companies slashing capital spending in a bid to hold cash as the coronavirus hits bottom lines.

“Even with weakened earnings announced in Q1 2020, a consistent trend among major oil and gas producers was emphasis on protecting dividend payments to shareholders,” said Daniel Rogers, oil and gas analyst at GlobalData.

Of the oil majors, only Royal Dutch Shell announced that it would cut its dividend, instead opting to prioritize investments and financial prudency instead. GlobalData said that this approach could have “negative implications” for its share price in the future.

“The oil majors are well known to the public markets for their attractive dividend yields, and prioritising these may be the only way to continue attracting investment as public sentiment wains in the wake of greener energy and share prices underperform,” Rogers added.

It is important to note that first quarter earnings for big oil only cover the period ending up to March, and thus only the start of the market turmoil that has plagued the sector. The coronavirus hit will instead be felt more forcefully in the second quarter figures, as majors continue to suffer from low prices, chronically short storage and production shut-ins.

Tanks begin to top

Global storage for crude is running critically low, with many countries already out of space and tankers idling at sea waiting to deposit unneeded oil.

On Tuesday, Indian Oil Minister Dharmendra Pradhan said that the country now had more than 50 million barrels of crude sitting on-board tankers at sea, as storage remains effectively full in India.

Meanwhile in late April, the US Coast Guard noted that there were an unprecedented 27 vessels waiting off the coast of Southern California filled with oil with nowhere to deposit. The oil off California alone would be enough to satisfy 20 percent of the world’s consumption, according to Bloomberg.

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