Big Oil faces pressure from shareholders over costs

Thu Oct 31, 2013 4:38pm EDT
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By Andrew Callus and Anna Driver

LONDON/HOUSTON (Reuters) - Oil industry shareholders concerned about poor returns and costly projects urged executives from Big Oil this week to return cash to shareholders - and at least one of the world's top five petroleum companies fully acquiesced.

As they posted third-quarter results, the leading oil companies vowed to control spending and to put cash in the pockets of investors through asset sales, share buybacks or dividends while analysts grumbled about lagging stock prices.

BP Plc (BP.L: Quote), the smallest of the group of five, was the most aggressive. It raised its dividend, cut back capital spending plans, and ramped up its asset sales target to $10 billion over the next two years from between $4 billion and $6 billion previously - cash that will also go back to shareholders.

Its shares have risen 6.8 percent since Monday's close.

"At the moment the market likes oil companies that cut back on expenditure and pay out big dividends," said Malcolm Graham-Wood, analyst and adviser at VSA Capital.

The other companies - Exxon Mobil Corp (XOM.N: Quote), Chevron Corp (CVX.N: Quote), Royal Dutch Shell Plc (RDSa.L: Quote) and Total SA (TOTF.PA: Quote) - acknowledged spending heavily to prevent output from falling but stopped short of major changes.

Exxon indicated its capital expenditures may subside next year after planned spending of $41 billion this year. It said it has returned $5.8 billion to shareholders in the third quarter through dividends and share repurchases, but did not raise its dividend.

The top five have all badly underperformed the global MSCI World index this year, which is up 20.6 percent for the year to date, even with share buybacks already under way.   Continued...

The Exxon corporate logo is pictured at a gas station in Arlington, Virginia January 31, 2012. REUTERS/Jason Reed