(MENAFN) The European oil companies, including BP, Shell, TotalEnergies, and Eni, have a proud European heritage, but their investors are not as enamored with them as their American counterparts. While American oil companies such as ExxonMobil and Chevron trade at 10 to 11 times their forward earnings, European oil companies trade at only five times their forward earnings.
Even though all oil companies have benefited from rising oil and gas prices, Shell's share price has only gained 78% since the start of 2021, while ExxonMobil's has risen by 165%. The valuation gap between European and American oil companies nearly closed after the 2008-2009 global financial crisis, but it ballooned again.
The European corporations have been trying to boost their low-carbon businesses by investing in offshore wind, solar power, electric vehicle charging, and batteries. Shell and BP have both recently spent billions of dollars to acquire bio-gas companies. However, they still have to prove that they can run non-fossil businesses as well as their own petroleum assets and specialist competitors.
On the other hand, the Americans have concentrated on their core petroleum businesses and are developing carbon capture and storage (CCS), which fits well with their overall strategy. Their major purchases have been of shale oil and deepwater exploration companies, which may be short-sighted given the ever-increasing imperative of climate policy. Nonetheless, for now, it has paid off.
In conclusion, the European oil companies are struggling to win over investors compared to their American counterparts, despite their efforts to invest in low-carbon businesses. The Americans' focus on their core petroleum businesses and development of CCS has paid off, while the Europeans still have to show that they can run non-fossil businesses as effectively as their petroleum assets. The ever-increasing importance of climate policy may force these companies to change their strategies, but for now, the American oil companies are winning over investors.
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