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Energy firms are pumping out free cash flow, making things harder for the ESG movement

Autor: Article based upon analysis from Reuters Breakingviews | Link: Anti-ESG movement has investment case
Timp de citit: 2 minute

The global energy crisis has fueled massive profits at companies like Chevron and Exxon Mobil, making the ESG movement’s mission harder to move forward.

The war in Ukraine has raised the demand for U.S. fossil fuels, so American companies experience cash flows as large as 70% of their value.

That’s the case for Alpha Metallurgical Resources, which should produce $1.4 billion this year, meaning that AMR is literally oozing free cash flow.

Rival Arch Resources is also expected to generate about $1 billion, nearly half of its total enterprise value. Warren Buffet made a very inspired move with his Berkshire Hathaway becoming the biggest stakeholder in Occidental Petroleum.

The American company engaged in hydrocarbon exploration in the U.S. should produce about 17% of its overall valuation.

Exxon Mobil, who announced Q3 earnings of $19.7 billion, could cash in around a fifth of its $461 billion worth this year.

Chevron also remains well positioned to navigate the volatility in oil and gas prices, since it reported a free cash flow of $10.7 billion in the quarter ending September 30.

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Of course, due to the energy transition process, coal and oil demand is expected to peak soon, before starting to decline.

Nevertheless, phasing out fossil fuels will take from two to five years, even more, while investors still look set to make a solid return.

Just last week Exxon and Chevron raised their spending estimates for next year, ignoring pressure from ESG investors and delivering strong prospects for the anti-ESG brigade.

Norway is one great example of how fossil fuels can bring prosperity while arguing for the closure of the oil and gas industry.

Greta Thunberg’s country is the largest fossil fuel producer in Western Europe, exporting nearly $40 billion of oil and gas in 2020.

Over three-quarters of the new cars now sold in Norway are electric, while oil consumption there only dropped 2% last year according to BP’s Statistical Review of World Energy.

While a new movement against fossil fuels has emerged, led by Norway`s youth, with the profits made by energy companies the argument is harder to be won.