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IEEFA brief: Oil majors’ shrinking capital expenditures (capex) signal ongoing decline of sector

February 26, 2020

February 26, 2019 (IEEFA U.S.) ‒ Faced with a convergence of market forces, the world’s five leading integrated oil and gas companies are reducing historically robust levels of capital spending, according to a briefing note released today by the Institute for Energy Economics and Financial Analysis (IEEFA).

The five largest integrated oil and gas companies ‒ ExxonMobil, Shell, Chevron, Total and BP ‒ in 2019 spent a total of $88.7 billion on capital projects, down nearly 50 percent from the $165.9 billion spent in 2013. Not since 2007 have the capital expenditures, or capex, among the five companies been so low, according to the note: Oil Majors’ Shrinking Capital Expenditures (Capex) Signal a Mature Industry in Decline.

“Diminishing capex should worry investors and serve as a warning that the oil and gas industry is not the cash cow it used to be,” said IEEFA energy financial analyst and lead author of the briefing note, Kathy Hipple. “Traditional businesses, like oil and gas exploration and production (E&P), refining, and petrochemicals are all showing signs of stress.”

The world’s largest publicly-traded oil and gas companies’ annual capex budgets are massive, in the tens of billions of dollars, even as they reduce annual allocations.  Capex budgets are spent on projects that take years to develop and are expected to be cash-producing assets for decades.

“The days of consistent, long-term 20 percent returns are long gone and the promise of petrochemicals as the savior of the supermajors is proving elusive as the financial outlook is, at best, mixed,” said IEEFA director of finance Tom Sanzillo who co-authored the report.

The five oil majors have taken different approaches to capex spending. ExxonMobil has in the last few years increased spending to $24.4 billion in 2019.  The company plans to increase capex in 2020 to more than $30 billion in what has been described as a counter-cyclical strategy.

While Exxon Mobil’s 2019 capital budget is 93 percent of its ten-year average of $26.1 billion, Chevron and Total, by contrast, have reduced their capex budgets. Chevron’s 2019 capex was $14.1 billion, approximately 60 percent of the nearly $24 billion 10-year annual average. Total’s spending declined to $11.8 billion in 2019, just over half its $21.1 billion 10-year annual average.

Oil Majors Capex spending 2004-2019

The industry is still struggling to recover from the drop in oil prices from more than $100/barrel in 2014 to $29/barrel in 2016. Natural gas prices have fallen even more dramatically to below $3/MMbtu. Long-term low prices mean revenues and profit margins are squeezed, leaving less cash available for capex.

“The industry claims it is motivated by capital discipline and higher levels of diligence, but another explanation is a lack of viable investment prospects,” said Hipple. “The decline in capex indicates an industry with lower production levels going forward and a smaller return on capital invested.”

Kathy Hipple is an IEEFA financial analyst.

Tom Sanzillo is IEEFA’s director of finance.

Clark Williams-Derry is an IEEFA energy finance analyst.


Briefing note: Oil Majors’ Shrinking Capital Expenditures (Capex) Signal a Mature Industry in Decline


Media Contact

Vivienne Heston (New York) [email protected] tel: +1 (914) 439-8921


The Institute for Energy Economics and Financial Analysis (IEEFA) conducts global research and analyses on financial and economic issues related to energy and the environment. The institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Kathy Hipple

Former IEEFA Financial Analyst Kathy Hipple is a founding partner of Noosphere Marketing and the finance professor at Bard’s MBA for Sustainability. She worked for 10 years with international institutional clients at Merrill Lynch and then served as CEO of Ambassador Media.

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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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Clark Williams-Derry

Clark Williams-Derry focuses on the finances North America’s oil, gas, and coal industries. His areas of expertise include: the long-term financial performance of North American oil & gas companies, particularly fracking-focused enterprises; company- and basin-specific studies of oil and gas production; U.S. LNG exports in the context of global markets; and U.S. and Canadian coal export projects.

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