Energy Sector Stocks Flush With Cash Amid Oil's Bear Market: Is There A Buy Signal In Sight?

Oil has entered a bear market while some oil majors are flush with cash. The key question: Will these cash piles be deployed toward accretive investments and/orshareholder returns?

Cash Pile In Sight

Exxon Mobil Corp XOM has about $32.94 billion cash on its balance sheet. Shell PLC SHEL boasts around $43.03 billion. Chevron Corporation CVX has $5.94 billion, TotalEnergies SE TTE $31.62 billion, BP PLC BP $30.86 billion and Equinor ASA EQNR $14.94 billion.

The covered ratio for all these companies is healthy at 67.27, 65.63, 12.26, 15.95, 17.10 and 35.03, respectively. This indicates that all these companies appear able to service their debt and meet their financial obligations, such as interest payments or dividends.

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All-Stock Deals In Vogue

Now, even though Exxon Mobil and Chevron have plenty of cash on hand, their acquisition targets are only accepting stock as payment. All-stock deals appear to be in vogue in the sector currently.

Exxon is purchasing Pioneer Natural Resources for $59.5 billion in shares.

Chevron said it will acquire Hess in an all-stock deal worth $53 billion.

Time For Shareholder Returns?

With the cash pile visible on their financials, and deals not taking any of it, investors would be expecting these energy giants to shed focus on shareholder returns. Some of it is already in the works.

ExxonMobil has already announced a raise in its annual share buybacks to $20 billion through 2025, up from the current $17.5 billion, following the completion of the Pioneer merger.

Shell announced a $3.5 billion share buyback program as it reported its third quarter earnings. The program was said to be carried out over the next three months.

It remains to be seen whether the markets would see Chevron, TotalEnergies, BP ad Equinor also treading a similar path.

Investors must bear in mind that share buybacks are accretive to share prices. And with the oil bear market upon the sector, most of these stocks are trading at attractive multiples. Is a buy signal in sight?

For reference, these stocks are currently trading at a forward Price/Earnings (GAAP) multiple of 10.67, 10.26, 8.69, 6.95, 5.68, and 7.89, respectively.

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