The value of major integrated oil and gas companies is based largely on the amount of oil and gas those companies list as proved reserves. Energy infrastructure companies that own and operate pipelines and storage facilities are valued primarily based on their capacity and firm contracts for transporting liquids or natural gas.

Over the past year, the oil majors have seen their share prices plunge. Even before the virtual halt to the global economy due to the COVID-19 pandemic, stock prices were down by as much as 20%. Tumbling crude oil prices slashed the value of the companies’ proved reserves.

The relationship between proved reserves and an oil company’s dividend yield matters a lot when crude prices are falling. The big question, of course, is whether the oil giants can maintain those luxurious dividends when low prices are hammering their cash flows.

Infrastructure companies have long relied on growth to fund their handsome distributions. Many are structured as master limited partnerships (MLPs) and the limited partners (unitholders) are paid distributions that are untaxed at the company level. To continue growing, these companies need a lot of capital, and they typically borrow freely.

Most interstate pipeline transportation rates are regulated and cash flow can be pretty well figured out. To boost distributions, these firms need to build new pipelines or expand existing capacity.

Here’s a look at three oil and gas exploration and production companies and two top pipeline companies. All offer generous dividend yields at current oil prices. How long can this last? After all, if something can’t last forever, it won’t (Stein’s law). A particular warning sign of an endangered dividend is how much of the company’s operating cash flow it consumes. By that metric, these five companies may be paying out too much to shareholders.

Exxon Mobil Corp. (NYSE: XOM) is the country’s largest integrated oil company, with a market cap of around $182.5 billion. The company’s proved reserves at the end of 2019 totaled 22.4 billion barrels of oil equivalent, of which 65% were liquids. Proved reserves are those that have a reasonable certainty (around 90%) of being profitably produced at existing market prices.

At 2019’s monthly average price for benchmark Brent crude of about $64, the value of Exxon’s reserves approaches $1.4 trillion. The U.S. Energy Information Administration (EIA) estimates that 2020’s monthly average will be around $41, slashing a third from the value of Exxon’s proved reserves. Exxon, however, has refused to reduce the value of its reserves, saying that the company’s calculations comply with U.S. Securities and Exchange Commission (SEC) rules.

Exxon’s annual dividend is $3.48 per share, for a yield of 8.05% at Wednesday’s closing price of $43.14 per share. The consensus price target on the stock is $47.58, implying an upside of 10.3% The company paid $14.7 billion in dividends last year and reported operating cash flow of $29.7 billion. Capital spending for the year totaled $24.4 billion.

Chevron Corp. (NYSE: CVX) reported proved reserves of 11.4 billion barrels of oil equivalent at the end of 2019. At last year’s average price, those reserves were valued at nearly $730 billion. At the current EIA estimate, those barrels are worth about $490 billion. Chevron wrote down $10 billion on the value of its assets in December.

Chevron’s annual dividend of $5.16 represents a yield of 5.98% at Wednesday’s closing price of $86.35. The consensus price target is $98.52, implying an upside of 14.1%. The company paid $9.0 billion in dividends last year, along with $14.1 billion in capital spending, on operating cash flow of $27.3 billion.

BP PLC (NYSE: BP) had proved reserves totaling 19.3 billion barrels of oil equivalent at the end of last year. At last year’s average, those barrels had a value of more than $1.2 trillion. At this year’s estimated average, the value drops to around $800 million. BP said in June that it is taking a write-down of up to $17.5 billion in the second quarter. The company’s market cap is $78.4 billion.

BP’s annual dividend of $2.52 per American depositary share represents a yield of 10.88% at Wednesday’s closing price of $23.16. The price target is $30.49, implying an upside of 31.6%. In 2019, BP paid $6.9 billion in dividends and reported capital spending of $15.4 billion, on operating cash flow of $25.8 billion.

Enterprise Products Partners L.P. (NYSE: EPD) is the largest pipeline company in the United States, with a market cap of $38.3 billion. The company owns 5,300 miles of crude oil pipelines, plus 19,900 miles of pipelines to transport natural gas liquids and another 19,400 miles of natural gas pipelines. The infrastructure giant’s share price is down nearly 37% over the past 12 months.

Enterprise pays an annual distribution of $1.78, for a yield of 10.1% at Wednesday’s closing price of $17.54. The price target on the common units is $24.30, implying an upside of 38.5%. Recent setbacks to pipeline companies have weighed heavily on the midstream sector. In 2019, Enterprise paid out $3.8 billion in distributions and reported $4.5 billion in capital spending, on operating cash flow of $6.5 billion.

Energy Transfer L.P. (NYSE: ET) owns and operates more than 26,000 miles of natural gas and liquids pipelines and has a market cap of $11.3 billion at Wednesday’s closing price. Over the past 12 months, Energy Transfer common units have lost slightly more than 50% of their value. The company’s most recent setback is a court-ordered shutdown of its Dakota Access Pipeline.

The company pays an annual distribution of $1.22, for a yield of 19.3% at Wednesday’s closing price of $6.54. The price target is $11.32, implying an upside of around 50%. Energy Transfer paid out $3.1 billion in dividends last year and reported capital spending of $6.0 billion, on operating cash flow of $8 billion.

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