Which Oil Major Returns the Most Cash to Investors?

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The world's largest oil companies, such as ExxonMobil (NYSE: XOM)Royal Dutch Shell and Total SA, are well known for their larger than average free cash flows, which allow them to return large amounts of cash to investors through stock repurchase programs and dividends. However, with each company providing equally impressive returns, which offers investors the most by way of cash returns.

ExxonMobil, the world's largest oil company by market cap, is under pressure to return lots of cash to investors, and the company does this through a combination of buybacks and dividends. On the other hand, Chevron (NYSE: CVX) has focused more on dividend payouts rather than stock repurchases and offers a stronger yield than Exxon but smaller overall returns. 

For this analysis, I am going to be analyzing the companies based on the total amount of cash returned to shareholders, per share during the period. Then I'm going to use this per-share amount to arrive at a total returned as a percentage of the average share price for the period.

ExxonMobil

<table> <thead></thead> <thead> <tr><th> <p>Billions<strong></strong></p> </th><th> <p>2011<strong></strong></p> </th><th> <p>2012<strong></strong></p> </th><th> <p>Q1 2013<strong></strong></p> </th><th> <p>Average Retuned<strong></strong></p> </th></tr> </thead> <tbody> <tr> <td> <p>Number of shares in issue (Billions)</p> </td> <td> <p>4.88</p> </td> <td> <p>4.63</p> </td> <td> <p>4.49</p> </td> <td> </td> </tr> <tr> <td> <p>Total dividend (Billions)</p> </td> <td> <p>$9.00</p> </td> <td> <p>$10.10</p> </td> <td> <p>$2.56</p> </td> <td> </td> </tr> <tr> <td> <p>Total repurchases (Billions)</p> </td> <td> <p>$21.13</p> </td> <td> <p>$20.88</p> </td> <td> <p>$5.62</p> </td> <td> </td> </tr> <tr> <td> <p>Returned per share</p> </td> <td> <p>$6.17</p> </td> <td> <p>$6.69</p> </td> <td> <p>$1.82</p> </td> <td> </td> </tr> <tr> <td> <p>Average Share Price</p> </td> <td> <p>$76.80</p> </td> <td> <p>$82.20</p> </td> <td> <p>$88.40</p> </td> <td> </td> </tr> <tr> <td> <p>Total Returned</p> </td> <td> <p>8.0%</p> </td> <td> <p>8.1%</p> </td> <td> <p>2.1%</p> </td> <td> <p>8.2%</p> </td> </tr> </tbody> </table>

As the biggest company in the world, Exxon is under a certain amount of pressure to return cash to shareholders, which it does well. Exxon has returned around 8.2% to investors annually (based on Q1 2013 the company is set to return an annualized 8.4% this year). On a per share basis, both stock repurchases and dividends meant that shareholders received $6.17 per share in 2011 and $6.69 in 2012.  Based on the average share price for the year, this was a total cash return of 8% and 8.1%, respectively.

Chevron

<table> <thead> <tr><th> <p>Billions</p> </th><th> <p>2011</p> </th><th> <p>2012</p> </th><th> <p>Q1 2013</p> </th><th> <p>Average Return</p> </th></tr> </thead> <tbody> <tr> <td> <p>Number of shares in issue (Billions)</p> </td> <td> <p>1.99</p> </td> <td> <p>1.95</p> </td> <td> <p>1.93</p> </td> <td> </td> </tr> <tr> <td> <p>Total dividend (Billions)</p> </td> <td> <p>$6.14</p> </td> <td> <p>$6.84</p> </td> <td> <p>$1.74</p> </td> <td> </td> </tr> <tr> <td> <p>Total repurchases (Billions)</p> </td> <td> <p>$3.19</p> </td> <td> <p>$4.14</p> </td> <td> <p>$1.00</p> </td> <td> </td> </tr> <tr> <td> <p>Returned per share</p> </td> <td> <p>$4.69</p> </td> <td> <p>$5.63</p> </td> <td> <p>$1.42</p> </td> <td> </td> </tr> <tr> <td> <p>Average share price</p> </td> <td> <p>$102.60</p> </td> <td> <p>$105.10</p> </td> <td> <p>$116.00</p> </td> <td> </td> </tr> <tr> <td> <p>Total returned</p> </td> <td> <p>4.6%</p> </td> <td> <p>5.4%</p> </td> <td> <p>1.2%</p> </td> <td> <p>4.9%</p> </td> </tr> </tbody> </table>

Despite trading at a higher valuation, Chevron does not return as much cash to shareholders as Exxon. Chevron has returned around 4.9% to investors annually (based on Q1 2013 the company is set to return an annualized 4.8% this year). On a per share basis, both stock repurchases and dividends meant that shareholders received $4.69 per share in 2011 and $5.63 in 2012. Based on the average share price for the year, this was a total cash return of 4.6% and 5.4%, respectively.

ConocoPhillips (NYSE: COP)

<table> <thead> <tr><th> </th><th> <p>2011</p> </th><th> <p>2012</p> </th><th> <p>Q1 2013</p> </th><th> <p>Average Return</p> </th></tr> </thead> <tbody> <tr> <td> <p>Number of shares in issue (Billions)</p> </td> <td> <p>1.38</p> </td> <td> <p>1.24</p> </td> <td> <p>1.24</p> </td> <td> </td> </tr> <tr> <td> <p>Total dividend (Billions)</p> </td> <td> <p>$3.63</p> </td> <td> <p>$3.28</p> </td> <td> <p>$0.82</p> </td> <td> </td> </tr> <tr> <td> <p>Total repurchases (Billions)</p> </td> <td> <p>$11.03</p> </td> <td> <p>$4.96</p> </td> <td> <p>-$0.01</p> </td> <td> </td> </tr> <tr> <td> <p>Returned per share</p> </td> <td> <p>$10.62</p> </td> <td> <p>$6.65</p> </td> <td> <p>$0.65</p> </td> <td> </td> </tr> <tr> <td> <p>Average share price</p> </td> <td> <p>$67.80</p> </td> <td> <p>$65.00</p> </td> <td> <p>$58.80</p> </td> <td> </td> </tr> <tr> <td> <p>Total returned</p> </td> <td> <p>15.7%</p> </td> <td> <p>10.2%</p> </td> <td> <p>1.1%</p> </td> <td> <p>10.4%</p> </td> </tr> </tbody> </table>

ConocoPhillips’ results are somewhat skewed due to the separation from Philips 66 last year. Indeed, in 2011 and 2012, Conoco returned 15.7% and 10.3% to shareholders, respectively; however, this is set to fall to around 4.4% this year based on the first quarter results.

That said, based on the data at the bottom of this article, it would appear that although Conoco has reduced shareholder returns, it still has plenty of room to increase them again.

Occidental Petroleum (NYSE: OXY)

<table> <thead> <tr><th> <p>Millions</p> </th><th> <p>2011</p> </th><th> <p>2012</p> </th><th> <p>Average Return</p> </th></tr> </thead> <tbody> <tr> <td> <p>Number of shares in issue (Billions)</p> </td> <td> <p>0.812</p> </td> <td> <p>0.809</p> </td> <td> </td> </tr> <tr> <td> <p>Total dividend (Billions)</p> </td> <td> <p>1.44</p> </td> <td> <p>2.13</p> </td> <td> </td> </tr> <tr> <td> <p>Total repurchases (Billions)</p> </td> <td> <p>$0.22</p> </td> <td> <p>$0.50</p> </td> <td> </td> </tr> <tr> <td> <p>Returned per share</p> </td> <td> <p>$2.05</p> </td> <td> <p>$3.25</p> </td> <td> </td> </tr> <tr> <td> <p>Average share price</p> </td> <td> <p>$98.20</p> </td> <td> <p>$91.50</p> </td> <td> </td> </tr> <tr> <td> <p>Total returned</p> </td> <td> <p>2.1%</p> </td> <td> <p>3.6%</p> </td> <td> <p>2.8%</p> </td> </tr> </tbody> </table>

Lastly, Occidental appears to be retuning the least to shareholders out of the whole group – the company returned around 2.8% to investors annually. On a per share basis, with both stock repurchases and dividends, shareholders received $2.05 per share in 2011 and $3.25 in 2012.  Based on the average share price for the year, this was a total cash return of 2.1% and 3.6%, respectively.

But will these returns continue?

<table> <thead> <tr><th> <p>Company</p> </th><th> <p>ExxonMobil</p> </th><th> <p>Chevron</p> </th><th> <p>Conoco</p> </th><th> <p>Oxy (Q4 2012)</p> </th></tr> </thead> <tbody> <tr> <td> <p>Net operating cash flow</p> </td> <td> <p>$13590</p> </td> <td> <p>$5710</p> </td> <td> <p>$4730</p> </td> <td> <p>$2810</p> </td> </tr> <tr> <td> <p>Cash dividends paid</p> </td> <td> <p>$2560</p> </td> <td> <p>$1740</p> </td> <td> <p>$815</p> </td> <td> <p>$876</p> </td> </tr> <tr> <td> <p>Stock repurchased</p> </td> <td> <p>$5620</p> </td> <td> <p>$1030</p> </td> <td> <p>$10</p> </td> <td> <p>$355</p> </td> </tr> <tr> <td> <p>Total Returned</p> </td> <td> <p>$8180</p> </td> <td> <p>$2770</p> </td> <td> <p>$825</p> </td> <td> <p>$1231</p> </td> </tr> <tr> <td> <p>Cover by cash flow</p> </td> <td> <p>1.7x</p> </td> <td> <p>2.1x</p> </td> <td> <p>5.7x</p> </td> <td> <p>2.3x</p> </td> </tr> </tbody> </table>

Looking at company cash flows for the first quarter of this year, it would appear that four companies have plenty of room to continue these high shareholder returns. Even Exxon, which is returning 8% to investors each year, has room to almost double its cash returns to investors.

Occidental paid a special dividend at the end of 2012, therefore it did not pay a dividend in the first quarter of this year. Still, even after doubling its payout, the total amount of cash returned to shareholders was covered more than two times by operating cash flow.

As I have mentioned above, Conoco has reduced its shareholder returns after its separation from Philips--but based on the company’s first quarter results, after the separation there is still plenty of room to increase shareholder payouts.

Conclusion

It would appear that on a yearly per share basis, Exxon has and will continue to return the most cash to investors. This is not surprising given the company's size, but it is surprising that the company has space available in its cash flow to almost double shareholder returns.

However, Conoco has plenty of room in its cash flow to double or even triple existing shareholder returns.

So overall, for investors who are looking for large returns from their investments, Exxon looks to be the company to turn to, but Conoco could take its position in the future.

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Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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