Recent Results Highlight the Challenge Energy Companies Face Navigating the Transition

Just as some companies are looking to increase investment into low carbon energies and technologies, cash flow and earnings have been hit by the impact of lower oil prices as a result of the pandemic.  Pandemic or not, this highlights the challenge energy companies face as they look to harvest value from traditional business lines, reinvest capital into new business lines, and continue to pay dividends to shareholders.

Growing the dividend means less capital is available to fund the transition that some have made clear is a strategic priority.  Is that the right move?  Are they sacrificing long-term value creation in the name of short-term returns?  

Managing the tension between investment in a resilient base, investment in the transition, and returns to shareholders over time is difficult.  Doing so requires clarity and alignment on the interplay between strategic and financial objectives and the ability to test various portfolio outcomes to understand implications for the evolution of the macro portfolio shape over time.  As companies gain greater understanding and confidence in the return profile of transition investments the balance of investment into the transition should start to accelerate.