Big Oil raked in record profits last year, but check out Big Tech

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If you think oil and gas giants made boatloads of money last year, take a look at Big Tech.

In 2022, when investors were falling out of love with high-growth names, four of the U.S’s biggest technology companies collectively posted about 41% more profit than five of the energy industry’s super-majors.

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG) (GOOGL), and Meta (META) brought in a total of $255.7 billion in net income for their full or fiscal year 2022. Compare that to the combined all-time high profit of almost $180 billion from Chevron (CVX), ExxonMobil (XOM), Shell (SHEL), BP (BP), and TotalEnergies (TTE).

The five Big Oil majors individually posted record annual net income after Russia’s invasion of Ukraine sent crude prices close to $130 per barrel.

“They made a ton of money benefitting from high crude oil and natural gas prices. They were in the right place at the right time.” Andy Lipow of Lipow Oil Associates recently wrote in a note to clients, noting the comparison with Big Tech profits.

The energy industry’s windfall is a reversal of fortune from two years ago. “During the pandemic, when crude prices fell to $20 per barrel, they lost tons of money,” said Lipow.

‘It’s outrageous’

Though Big Tech is often under antitrust scrutiny, Big Oil’s record profit is repeatedly the target of politicians’ criticism, especially from the White House.

“You may have noticed that Big Oil just reported record profits,” President Biden said during his State of The Union address this week. “It’s outrageous. They invested too little of that profit to increase domestic production and keep gas prices down.”

Gasoline hit $5 per gallon last year before retreating but could be headed towards $4 again by April.

Big Oil’s five super-majors’ net income for 2022 totaled roughly $180 Billion versus Big Tech’s $255 Billion

‘Cautious Investing’

Energy companies have been using their cash during boon times to pay down debt, and return money to shareholders in the form of dividends and share buyback programs.

“Cautious investing Capital discipline has emerged as one of the most important themes in the energy sector,” analyst Peter McNally of Third Bridge recently told investors.

When Chevron announced a $75 billion buyback program in January, the move was quickly blasted by the White House.

However Apple bought back almost $90 billion worth of its shares in its fiscal year 2022, which ended last September. Over the last decade, the tech giant has shelled out more than $550 billion to buy back its own stock.

Last week Meta announced a $40 billion buyback program, despite a slowing ad revenue environment and recent layoffs.

“It is fair to compare them [oil vs tech profits] because I think it’s unfair, to go after the energy companies as much as the politicians do,” Matt Maley, chief market strategist at Miller Tabak told Yahoo Finance.

“It cost a boatload of money to invest in the extraction of oil,” adding oil executives often ask “Why would we do that if you’re telling us that you’re gonna put that stuff out of business?”

In January, ExxonMobil announced capital and exploration expenses of $23 billion to $25 billion for 2023.

Chevron expects to spend about $17 billion this year to explore and for production. That’s about 25% more than in 2022. Last year the oil giant acquired Renewable Energy Group, a biodiesel production company, for $3.15 billion. The move though, is probably not enough to appease Big Oil critics, according to Third Bridge’s McNally.

“Chevron’s $3 billion investment in U.S.-based Renewable Energy Group are unlikely to sway the White House,” said McNally, noting Chevron’s share buyback program is equivalent to more than four times its planned 2023 capital expenditure.

Energy stocks far outperformed the broader markets in 2022, while technology and communication services equities fell. Though oil and gas companies may not repeat the record profits of last year, it’s expected they will still do well this year.

“Now that China, Europe, and the U.S. are in the midst of an economic recovery, as global demand rises, crude oil prices are expected to hit $100 per barrel in the upcoming months, and $120 per barrel prices are very possible during the summer months when there is peak demand,” Louis Navellier of Navellier Investing told Yahoo Finance.

“I overwhelmingly prefer energy stocks over technology stocks, simply because energy has much stronger forecasted revenue and earnings, plus continues to trade well below the PE ratio for the S&P 500,” he added.

Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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