Wednesday 28 September 2016

Worst quarter yet for oil majors expected

Karolin Schaps and Ron Bousso

Published 25/04/2016 | 02:30

'Oil companies have slashed spending budgets by more than 25pc since 2014, scrapped dozens of multi-billion dollar projects, slashed tens of thousands of jobs and reduced costs by at least 20pc' Stock photo: Depositphotos
'Oil companies have slashed spending budgets by more than 25pc since 2014, scrapped dozens of multi-billion dollar projects, slashed tens of thousands of jobs and reduced costs by at least 20pc' Stock photo: Depositphotos

The world's top oil companies are set to report their worst quarterly results yet in the current downturn, though a recent recovery in crude prices is raising hopes the market has bottomed out.

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Britain's BP will be the first of the 'oil majors' to report results on Tuesday. It recorded its worst-ever annual loss in 2015, while Shell posted its lowest annual income in over a decade, setting the scene for a poor start to 2016.

"This reporting period looks set to be even worse than what we thought was already an especially ugly final quarter for 2015," said Jason Gammel, equity analyst at Jefferies.

Investors will be seeking reassurance that dividend payments will be maintained, a key factor making big oil attractive. Only Italy's Eni and Spain's Repsol have cut dividends so far.

BP struck a cautious tone on dividends this month, though, saying it aimed to maintain payments but could review that policy if oil prices remained lower for much longer.

Oil companies have slashed spending budgets by more than 25pc since 2014, scrapped dozens of multi-billion dollar projects, slashed tens of thousands of jobs and reduced costs by at least 20pc.

Experts say some companies, such as Shell, may have to cut deeper.

An ever intensifying oil supply glut took global prices to a near 13-year low of $27.10 a barrel in January, exacerbating pressure on oil producers already grappling with a more than 70pc slide in prices since mid-2014. A stunning 60pc rally in oil prices from their January low, however, has given strong tailwind to energy shares as investors are willing to look past the near-term pain.

Irish Independent

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