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Recently, the five major international oil companies – ExxonMobil, Shell, BP, Chevron, and TotalEnergies – have successively released profit forecasts, all indicating that earnings in the fourth quarter of 2025 are expected to decline due to low oil prices and shrinking profits from chemical operations. In contrast, these companies achieved strong performance despite adverse market conditions over the past year: while international oil prices fell by about 20% in 2025, the stock prices of these five major companies rose by 4% to 18%. The market is using capital to vote for financial discipline, indicating that the core of industry value assessment has shifted from external oil prices to an enterprise’s internal cost control and cash flow generation capabilities. Redesign of valuation logic: Cash flow becomes the new \"hard currency\" Over the past year, the capital market has made fundamental changes to the pricing models used for oil giants. Traditionally, oil stocks are viewed as direct derivatives of crude oil prices, with their trends being highly synchronized. However, the market performance in 2025 completely reversed this correlation. Investors’ preference did not go toward commodity prices, but rather toward a company’s excellent \"financial discipline.\" A decisive shift has occurred in the key indicators. When the average price of Brent crude oil hovered at $65 per barrel, the five major companies combined generated approximately $96 billion in free cash flow. This figure is almost on par with the historical peak level of 101 billion dollars, reached in 2008 when oil prices stood at 100 dollars per barrel. It proves that these giants have the ability to generate substantial cash flow consistently at moderate oil price levels. The market is rewarding this inherent resilience. The rise in stock prices reflects the pricing of a series of decisive actions: the strategic divestiture or reduction of unprofitable low-carbon businesses, the achievement of significant cost savings through integration following major acquisitions and large-scale layoffs, and the concentration of capital expenditures on core upstream assets that offer cost advantages. Its strong free cash flow enables the payment of high dividends and stock repurchases, making it a reliable \"income asset\" in volatile markets. Comprehensive “weight loss”: An efficiency revolution driving impressive cash flows. Behind those impressive cash flow figures lies a thorough \"efficiency revolution\" that reaches deep into every aspect of operations. The major players have achieved extreme cost reduction and efficiency improvement through three clear paths. First is the structural restructuring of organizations and human resources. After ExxonMobil acquired Pioneer Natural Resources and Chevron acquired Hess, both companies swiftly carried out the integration and optimization of workforces on a scale of tens of thousands of employees. Under shareholder pressure, BP has accelerated the reduction of its workforce among contractors and office staff. At its core, it involves using digital and automated technologies to drive a permanent transformation of organizations toward being more flat and agile, with the aim of systematically reducing fixed operational costs. Next is portfolio focus and optimization. The strategic focus has clearly returned to the \"cash cow\" businesses. European companies such as BP and Shell have shown prudence in capital management by writing down or exiting certain renewable energy projects that required substantial initial investment but yielded poor returns. American giants have further strengthened their leadership in key low-cost production areas such as the Permian Basin through mergers and acquisitions, seeking the combined benefits of increased production and reduced unit costs. Finally, there is extreme restraint and careful allocation of capital expenditure. Investments in low-carbon businesses have shifted from a \"scale-driven approach\" to one that gives priority to efficiency, setting higher thresholds for economic returns. At the same time, in traditional sectors, capital is also directed preferentially toward short-cycle, high-return maintenance projects and areas with competitive advantages, in order to maximize the efficiency of output per dollar invested. New severe challenges: New hurdles on the tightrope. However, the ongoing low oil price environment is approaching the critical point of the current success model, and more complex balancing challenges will arise by 2026. The most direct threat lies in the potential weakening of the shareholder returns pillar. Several analysts warn that if oil prices remain below $70 per barrel for an extended period, in order to maintain healthy balance sheets and fund the necessary investments in energy transition, these giants may be forced to reduce their stock repurchase activities – which were previously the key factor supporting their stock prices despite fluctuations in oil prices. Once buybacks decrease, market confidence will face a direct test. Management is thus faced with an even more difficult strategic balance. They must find the optimal solution under triple pressure: first, to meet investors’ ongoing demand for high immediate cash returns (dividends and buybacks) in order to sustain valuations ； Secondly, to ensure long-term survival, it is necessary to make appropriate investments in next-generation energy technologies (such as carbon capture, hydrogen energy, and geothermal energy) as well as the continuation of existing assets ； Thirdly, when revenue faces pressure, it is also necessary to seek further opportunities to reduce costs. How to allocate limited cash flow among these three is the ultimate test of managerial art. Early warning signs have already appeared recently. ExxonMobil, Shell, and BP have all warned that profits in the fourth quarter of 2025 will decline significantly due to low oil prices and narrowing profit margins on chemical products. This indicates that it is becoming increasingly difficult to fully offset revenue pressures solely through cost control.