Last year, the demand for loans from fossil-fuel companies saw a significant decline of 6% year-on-year, following a 1% decrease in 2022. While this may appear positive from a climate perspective due to reduced investment and production, experts warn that the industry’s financial health is stronger than ever.
Andrew John Stevenson, a senior analyst at Bloomberg Intelligence, highlighted that oil and gas companies are currently reaping substantial profits from their core operations, eliminating the need for extensive loans. This trend is expected to continue until the end of the decade, fueled by rising oil prices and solid demand.
The sector’s robust free cash flow has resulted in a sharp decline in the leverage ratio, indicating strong financial stability. Banks, which traditionally supported capital spending for oil and gas companies, are witnessing a shift as many firms now generate more cash than needed for investments.
Despite environmental concerns, companies like Chevron Corp. and Saudi Aramco are poised to ramp up production through 2030, thanks to ample free cash reserves. This development contradicts efforts by the banking sector to limit fossil fuel extraction to combat climate change.
Exxon Mobil Corp. and Chevron recently reported booming production levels, with expectations of a 10% increase in the Permian Basin. This surge aligns with projections from the International Energy Agency forecasting record-high oil demand this year.
Overall, the oil and gas industry’s financial strength and production growth indicate a challenging road ahead for climate advocates and environmental conservation efforts. Stay informed with Fortune’s CFO Daily newsletter for the latest updates on corporate finance trends and industry developments.
