Big Oil's Debt Reduction Trumps Buybacks Amid Record Profits

Big Oil's windfall profits from global energy market disruptions have become a political flashpoint as inflated energy prices stoke inflation worldwide. ExxonMobil Holdings Corp. and Chevron Corp., two of the largest US oil companies, plowed their blowout profits into debt reduction rather than huge buyback increases.

The supermajors more than doubled second-quarter net income due to global energy market disruptions stemming from conflicts in the Persian Gulf and Russia. However, they refrained from lavishing the proceeds on investors.

ExxonMobil lowered its net debt by over US$7 billion during the quarter, equivalent to almost half the company's adjusted net income for the period. Chevron steered a record US$8.4 billion into debt reduction, slashing its ratio of net debt to cash flow from operations by more than half.

Big Oil's windfall profits are highly profitable due to customers scrambling to replace flows from the Persian Gulf, a gateway for 20% of the world's petroleum. Crude has dropped since spiking to over US$125 a barrel in April due to on-off talks between the U.S. and Iran.