European oil companies are paying out billions. Which of these 6 stocks offers the most today?
Brent crude traded at an average of about $104 a barrel in the second quarter, more than half higher than a year ago, and European refiners saw margins surge over the same period. European energy groups turned that into their strongest series of results in years and handed out the money immediately. Eni raised this year's share buyback from an original €1.5 billion to €3.4 billion, ORLEN paid its highest dividend in history, and OMV sent shareholders €4.40 per share.
Key points
Record payouts by European oil companies this year were not paid for by the oil price, but by one other number. That is exactly what six governments want to tax in Dublin on 18 and 19 September.
Eni will decide on an extraordinary dividend in October. It published the condition in advance and did not meet it in the second quarter.
Poland's windfall tax is before the constitutional court. If it passes, ORLEN would lose a significant part of this year's payout.
The highest dividend yield and the largest share buyback in the overview both have their own catch. Neither number means what it looks like at first glance.
The cheapest stock in the six is not the one with the most resilient payout. Exactly where those two things diverge is only shown by the valuation table.
Meanwhile, however, Brent has fallen back below $90 a barrel from its April peak of almost $128, and a document directly related to those payouts has been added in Brussels. The finance ministers of Germany, Italy, Poland, Austria, Spain and Portugal asked the Irish presidency on 24 August to include a European framework for taxing windfall profits of oil companies on the agenda of the finance ministers' meeting in Dublin on 18 and 19 September. They named the target specifically: margins on refined products.
It is one of the main sources of the extraordinary cash from which companies are increasing buybacks this year and preparing extraordinary payouts. ORLEN $PKN.WA, Shell $SHELL.AS, Eni $ENI.MI, TotalEnergies $TTE.PA, Equinor $EQNR.OL and OMV $OMV.DE are therefore not ranked by who offers the highest yield today, but by how much of their payout will survive if oil falls and Dublin reaches an agreement.
Refining margins added billions extra this year. Politicians are now targeting precisely those
The rise in oil prices boosted the results of upstream divisions directly and is the main reason why European groups earned more this year. The extra money funding increased buybacks and extraordinary payouts, however, came mainly from margins on refined products, i.e. the difference between the price of a barrel at the input and the price of diesel and gasoline at the output.
At OMV, the adjusted operating result of the Fuels segment rose to €446 million from €242 million a year earlier, and the market effect alone contributed €311 million to that improvement. The company attributes this to the indicator refining margin in Europe, which rose to $20.3 per barrel from $8.1, mainly due to a shortage of middle distillates. Eni built this year's budget on a margin of $6 per barrel and recalculated it to $14 after the second quarter.