Despite a 20% slump in oil prices in 2025, the world’s biggest international oil firms saw their stocks rise by 4% to 18%, breaking the correlation between crude prices and oil stocks.
Last year, investors appreciated the returns that were kept despite the oil price slide. They also cheered the strategic pivot of European majors to focus back on boosting their upstream production, Exxon and Chevron’s record-breaking Permian output, the synergies the U.S. supermajors began reporting from recent multi-billion-dollar acquisitions, and the cost-cutting measures of all five Big Oil firms.
This year, the majors face a more challenging test and potentially a more delicate balancing act to please investors as prices continue to linger in the low $60s per barrel, except for brief spikes on geopolitical news.
The share price rally against falling crude oil prices could come to an end as Big Oil may have to choose to sacrifice some buybacks as profits are set to slide with the expected lower oil price, analysts say.
Good 2025 for Cash Flows and Cost Cuts
Last year, the supermajors moved to streamline operations, reduce job numbers in the thousands, and, in the case of ExxonMobil and Chevron, began reaping the benefits of recent mega-mergers.
Big Oil accelerated layoffs in search of further cost cuts and greater efficiency amid industry consolidation, weaker oil prices, and technology advances. The number of office-based employees and contractors is shrinking, as the companies have pledged billions of U.S. dollars in cost savings and slimmer corporate structures. That’s to eliminate inefficiencies and high costs while keeping payouts to shareholders at much lower prices compared to the 2022 highs.
Exxon has already eliminated about 400 jobs in Texas since it acquired Pioneer Natural Resources in a $60-billion deal finalized in May 2024. Exxon has also said it would slash 2,000 jobs worldwide, with nearly half of these cuts at its Canadian business, Imperial Oil.
Chevron, which bought Hess Corporation for $53 billion, has said it would reduce its workforce by 20% by the end of 2026 as part of wide cost cuts. This includes 800 jobs in the Permian.
BP, which is under intense shareholder pressure to slash costs and reduce debt, said in August that it was accelerating the reduction of contractor numbers and office-based workforce.
With thousands of job cuts, BP expects “material incremental savings from the first quarter of 2026,” chief financial officer Kate Thomson said on the Q2 earnings call.
These cost cuts and the pivot away from loss-making low-carbon energy businesses at the European majors helped Big Oil generate nearly as much free cash flow at $65 Brent in 2025 as it did back in 2008 when oil averaged $100 per barrel.
The Big Five – Exxon, Chevron, Shell, BP, and TotalEnergies – generated $96 billion in free cash flow last year, according to Bloomberg estimates reported by Bloomberg Opinion columnist Javier Blas.
The combined 2025 free cash flow compares with $101 billion in 2008 at a $100 a barrel oil price. Free cash flow has declined each year from the record-high of $194 billion in 2022, but it is still at very high levels historically.
Big Oil is now leaner and meaner, and working to create value for shareholders and attract investors. The market had stayed away from the sector in the early 2020s, when now-disproven forecasts of peak oil demand as early as this decade and an ESG investment trend vilified the industry and drove away potential investors.
But the new drive of energy security and affordability after the 2022 crisis gave the oil industry the license to operate and boost production to meet rising oil and gas demand.
More Difficult 2026 Ahead
With persistently lower oil prices and the large oversupply in the early months of 2026 further pressuring prices down, Big Oil, the national oil companies (NOCs), and the U.S. and international independents will face a tougher strategic balancing act than in 2025, WoodMac’s corporate research directors Tom Ellacott and Greig Aitken said in an outlook of corporate themes for 2026.
Companies are getting ready to weather the glut in 2026, and buybacks could be trimmed first, WoodMac reckons.
“Lower oil prices will force more structural cost reductions and cuts to buybacks. But the pressure will intensify to lay stronger foundations for next decade,” the analysts noted.
Big Oil firms have started to warn they would report in the coming weeks lower earnings for the fourth quarter compared to the third quarter amid low liquids prices, weak trading, and reduced chemicals margins.
Exxon flagged last week an $800 million to $1.2 billion hit to its fourth-quarter upstream earnings compared to Q3, while lower industry margins could eat up to $400 million of the earnings in the chemicals products division.
Shell warned of weak chemicals and products business for Q4, expecting the division to swing to a loss, on the back of a lower chemicals margin compared to the previous quarter.
BP expects to book up to $5 billion in impairments for the fourth quarter, mostly related to its energy transition businesses, while oil trading was weak and gas trading was average at the end of 2025.
With oil prices lower and markets oversupplied, Big Oil faces some tough decisions this year. If some choose to trim or slow the pace of buybacks, investors will take notice and may not reward the shares with performance beating crude price trends.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com
Oilprice Intelligence brings you the signals before they become front-page news. This is the same expert analysis read by veteran traders and political advisors. Get it free, twice a week, and you’ll always know why the market is moving before everyone else.
You get the geopolitical intelligence, the hidden inventory data, and the market whispers that move billions – and we’ll send you $389 in premium energy intelligence, on us, just for subscribing. Join 400,000+ readers today. Get access immediately by clicking here.
