Oil stock dividends to drop by $12B: Markit

Drilling rigs in the Cromarty Firth near Invergordon, Scotland, Britain.
Russell Cheyne | Reuters
Drilling rigs in the Cromarty Firth near Invergordon, Scotland, Britain.

Oil and gas dividends held up relatively well through 2015, but an extended trough in the commodity's price will see large energy firms slash payouts by a total of $12 billion this year, Markit warns.

Ten of the world's large cap energy firms — those with a market value of more than 10 billion — are set to cut their dividend in 2016 according to Markit's dividend forecasting unit, including Kinder Morgan, Eni, and Noble Energy, as a global oil supply glut keeps oil at decade lows.

Those cuts are set to bringing global payouts down 9 percent to $147 billion, marking a 22 percent drop from their 2014 peak of $189.3 billion.


Brent crude prices have already fallen over 16 percent since the start of January, extending the 36.8 percent slump tracked over the whole of 2015. There remains little hope for a price rebound after the International Energy Agency earlier this week said it expects a global economic slowdown to drive down demand, compounding existing concerns of oversupply.

ConocoPhillips is one of the 12 firms to have already slashed their dividend for 2015, having announced a 66 percent cut to its shareholder payout in an effort to preserve cash and manage debt levels.

Markit expects the American oil major to announce additional cuts at the end of 2016, adding that companies who rely on income from upstream operations — exploration and production, rather than transport, or refining — will be hardest-hit.

Still, 19 oil and gas firms are set to maintain their dividend this year — up from 11 in 2015 — while only 34 of the 66 large caps tracked by Markit are set to increase their payout. That's down from 40 dividend increases clocked in 2015, and 54 in 2014.

It's not all doom and gloom though, with two companies: Korea's SK Innovation and Brazil's Petrobras, set to initiate shareholder dividends despite the glut. However, these companies are generating enough funds for payouts from cutbacks, the report explains.

"It is interesting to note that many struggling firms which are not ready to cut their shareholders' remuneration are selling assets in order to make dividend payments." Markit said in the report.

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