At Bloomberg, Kevin Crowley explains the dichotomy of the oil and tech industries in America, and he reminds readers that America has become the world’s biggest oil producer. He writes:
Exxon Mobil Corp. and Chevron Corp. are generating returns not seen since their heyday over a decade ago, with $58.7 billion handed to shareholders last year and more to come in 2024, even if crude prices drop. And yet, they’re struggling to compete in a stock market beholden to Silicon Valley.
Chevron hit record production in 2023 while buying back 5% of its stock and forecasts oil and gas growth of as much as 7% this year, led by low-cost barrels from the Permian Basin. It was rewarded with a 3% bump in its shares Friday, slightly better than Shell Plc’s gain a day earlier. Exxon, which is gushing cash from the fast-growing oil discovery in Guyana, fell 0.4%.
Their stellar operational performance wasn’t enough to prevent them slipping further behind tech giants Meta Platforms Inc. and Amazon.com Inc., which surged 20% and 8% respectively. Meta, which already trades twice the price-to-earnings ratio of the oil giants, added $197 billion to its market value as it lifted buybacks and introduced a dividend. The owner of Facebook, Instagram and Whatsapp is now three times the size of Exxon.
“We are an essential industry to the global economy, an industry that’s been around for a long time and will be around for a long time in the future,” Chevron CEO Mike Wirth said on Bloomberg TV, adding that the company has increased its dividend for 37 consecutive years. “There’s a real value opportunity here for patient shareholders.”
The US is now the world’s biggest oil producer, pumping about 45% more than Saudi Arabia, in large part due to Exxon and Chevron’s frenetic drilling in the Permian Basin of Texas and New Mexico. And it’s a commodity still in high demand despite efforts to transition away, with consumption expected to rise through 2030 and perhaps beyond. But investors don’t seem to care. Energy makes up just 3.7% of the S&P 500 Index.
Read more here.
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