Will the Supermajors cut their dividends? Report

Insight 24 April 2020

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Report summary

Equinor’s 67% dividend cut has thrown down the gauntlet to the Supermajors. The world’s five largest IOCs have so far held firm on their dividend commitment even as yields have soared into double digits. The Supermajors have sufficient financial capacity to ride out the storm in 2020. But cash burn will be brutal at current prices and the market turmoil will concentrate minds on the task that lies ahead to build a sustainable business model. Are lower dividends needed to generate sufficient surplus cash flow to sustain the legacy business or build new cash engines in renewables?

Executive summary
- Are the Supermajors’ dividends still sacrosanct?
- Financial flexibility to pay dividends at US$25/bbl
- The Majors are burning through cash despite steep cost cuts
- A dramatic liquidity boost and strong balance sheets can support dividends in 2020
- The dividend dilemma – defend or cut?
- Equinor has cut first. Will a Supermajor break rank?

Tables and charts

This report includes 6 images and tables including:

Supermajors’ dividend growth per share
Evolution of dividend yield
Q4 2019 gearing versus estimated 2020 cash flow breakeven after cost cutting

Evolution of gearing at 2020 cash burn rate under US$25/bbl
Evolution of gearing at 2020 cash burn rate under US$25/bbl after 20% book value write-down
Dividend payments as a percentage of overall investment budgets have been rising