Thanks to strong oil prices, oil producers had a great year in 2022.
But President Joe Biden is not a fan.
“You may have noticed that Big Oil just reported record profits,” he says in his State of the Union address on Tuesday. “Last year, they made $200 billion in the midst of a global energy crisis. It’s outrageous.”
In particular, Biden does not like what oil companies are doing with those profits.
“They invested too little of that profit to increase domestic production and keep gas prices down. Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders.”
Buybacks are a way for companies to return money to investors. When a company buys back its shares, it reduces the number of shares outstanding, giving remaining shareholders larger ownership of the company.
The solution? More tax.
“I propose that we quadruple the tax on corporate stock buybacks to encourage long-term investments instead,” Biden says, adding that these oil companies will “still make a considerable profit” after the suggested tax hike.
Here’s a look at the three largest U.S.-based oil companies and how much they actually made — and rewarded their shareholders — in 2022.
Commanding a market cap of over $470 billion, Exxon Mobil (XOM) has been a stellar performer amid this stock market rout.
Shares are up 46% over the past year, in stark contrast to the S&P 500’s 10% decline over the same period.
It’s not hard to see why investors like the stock: the oil-producing giant gushes profits and cash flow thanks to a favorable commodity price environment. In 2022, Exxon earned $55.7 billion in profits, a huge increase from $23.0 billion in 2021. Free cash flow totaled $62.1 billion for the year, compared to $37.9 billion in 2021.
Solid financials allow the company to return cash to investors. In 2022, Exxon spent $14.9 billion on buybacks.
The company also pays quarterly dividends of 91 cents per share, translating to an annual yield of 3.2%.
Chevron (CVX) is another oil and gas giant benefiting from the commodity boom.
The company reported earnings of $35.5 billion for 2022, which represented a 127% increase from 2021. Sales and other operating revenues totaled $235.7 billion for 2022, up 51% year over year.
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Last month, Chevron’s board approved a 6% increase to the quarterly dividend rate to $1.51 per share. That gives the company an annual dividend yield of 3.6%. The board also approved a new $75 billion stock buyback program.
The stock has enjoyed a nice rally too, climbing 23% in the last 12 months.
In 2022, Chevron repurchased nearly 70 million shares for $11.25 billion.
ConocoPhillips (COP) is smaller than Exxon and Chevron in terms of market cap. But with proven reserves of 6.6 billion barrels of oil equivalent, it’s still a major player in the hydrocarbon exploration and production business.
And business is doing well. Full-year 2022 earnings came in at $18.7 billion for the company, $10.6 higher than in 2021. Excluding special items, adjusted earnings were $17.3 billion for 2022, also a huge improvement from the $8.0 billion generated in 2021.
ConocoPhillips returns cash to investors through ordinary dividends, a variable return of cash, and share buybacks.
In 2022, the company’s ordinary dividends and variable return of cash totaled $5.7 billion. It returned another $9.3 billion to investors through share repurchases.
The company is scheduled to pay an ordinary dividend of 51 cents per share on Mar. 1 and a variable return of cash of 60 cents per share on Apr. 14.
ConocoPhillips shares have climbed 18% over the past year.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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