Big Oil takes stag

LONDON, (Reuters) - With years of austerity in their rear-view mirrors, the world’s biggest oil companies are locked in a beauty contest to lure investors with promises of growth and greater rewards.

Royal Dutch Shell and Total are emerging as frontrunners after a three-year slump thanks to strong growth projections but Exxon Mobil, the biggest publicly traded oil company, has largely disappointed with a weaker outlook.

Major oil companies slashed spending and cut costs after oil prices collapsed in 2014 and can now generate as much cash with crude at $50-$55 a barrel as they did when the price was around $100 earlier in the decade.

Cash flow at oil companies in 2017 rose to its highest since before the slump, helped by the drastic cost cutting plans and a recovery in oil prices, and executives are once again turning their attention to growth.

With crude expected to hold above $60 a barrel into the end of the decade, major oil companies are confident they can boost already attractive payouts to shareholders.

Total sent the strongest signal, announcing plans to increase dividends by 10 percent, buy back $5 billion of shares by 2020 and abolish its so-called scrip policy introduced in the lean years of offering shares instead of cash dividends.

Analysts at Bernstein hailed the French company, which reported a 28 percent rise in fourth-quarter profit on Thursday, as “the new benchmark in shareholder returns” and upgraded their share recommendation to “outperform”.

“Clearly the U.S companies disappointed more whereas Total cheered everyone up together with Shell, even if it had a small miss,” said Alasdair McKinnon, portfolio manager at The Scottish Investment Trust.

BACK TO BUYBACKS

Norway’s Statoil and U.S. company Chevron Corp. have also raised their dividends over the past week, while BP was ahead of the pack by resuming share buybacks in the fourth quarter of 2017.

Shell, whose profits and cash flow beat Exxon’s last year, is now set to buy $25 billion of shares by the end of the decade after abolishing its scrip policy in November.

Analysts say Exxon remai an outlier after a disappointi drop in cash flow and produ tion in the fourth quarter rais concerns among investo about its strategy.

Shares of the Irving, Texa based company have fallen more than 10 percent over t past week, wiping $35 billi off its value. Its stock h trailed rivals significantly ov the past two years, reflecti its weaker outlook.

“All the majors are cheap the moment but maybe Exx is not the best major out ther We prefer Shell,” McKinn said.

Shell’s shares have outpe formed rivals with total shar holder returns of 90 perce over the past two years, sa Simon Gergel, chief inve ment officer for UK equities Allianz Global Investors.

“We were encouraged by t cost cutting plans of the com pany and the potential transfo mation of its future ca flows,” he said.

THE RACE IS ON

After three years of findi ways to save money throu job cuts, lower explorati budgets and harnessing ne technology to become mo efficient, executives ha moved growth to the fore a are scrambling to outshi each other.

“The priority of the board to maintain our ambitio growth and continue to a value for shareholders,” To Chief Executive Offic Patrick Pouyanne told inve tors on Thursday.

During a meeting with an lysts last week, Shell Chi Executive Ben van Beurd and Chief Financial Offic Jessica Uhl said nine times th their goal was to make t Anglo-Dutch company “world-class investment”.

The ambitious Dutch CE has publicly said he wan Shell to challenge Exxon