Oil Majors Thrive Despite Slump in Crude Prices -- Update
27 Juillet 2017 - 9:52AM
Dow Jones News
By Sarah Kent
Three years into a dramatic slump in oil prices, big oil
companies seem to have adapted their businesses to a point where
they can still generate cash and reduce debt levels even at current
oil prices.
European oil giants Royal Dutch Shell PLC, Total SA and Statoil
ASA kicked off the sector's second quarter earnings Thursday season
with a flurry of reports that highlighted growing cash flow and
sustained profits.
Though notably better than at the start of 2016 when the price
of crude plummeted to $27 a barrel, oil is still more than 50%
weaker than in 2014 when prices started to fall. The supply glut
that sparked the crash has proved stubbornly persistent despite
efforts by the Organization of the Petroleum Exporting Countries
and other major producers to limit output, prompting several large
banks to cut their oil price forecasts in recent months.
Still, the European oil companies struck a confident if cautious
note in their second quarter filings, trumpeting falling debt
levels and strong cash flow--a metric that has become increasingly
important to investors and analysts worried about ballooning debt
and dividend security in the wake of the oil price crash.
Shell's profit rose to $1.9 billion in the second quarter and
its cash flow from operations soared to $11.3 billion. The company
said it has generated $38 billion of cash from its business over
the last 12 months, enough to cover dividend payments and bring
down debt levels.
Total's profit for the quarter was stable but the company also
reported a significant increase in cash flow and reduced gearing.
Statoil swung to a profit of $1.4 billion in the period after
reporting a loss of $302 million in the same period in 2016. The
company said it generated $4 billion in free cash flow and reduced
net debt by 8 percentage points since the start of the year,
despite oil prices remaining around $50 a barrel.
The results reflect a yearslong campaign across the industry to
bring down costs and spending to a point where the companies can
operate profitably in a lower-oil-price environment. It's an effort
that remains ongoing.
Shell said it intends to maintain tight capital discipline going
forward and will continue to focus on bringing down costs and
capital efficiency. Statoil said it expects costs to continue to
improve this year and to squeeze out an additional $1 billion in
efficiencies.
U.S. oil majors Exxon Mobil Corp. and Chevron Corp. are set to
update on their second quarter Friday.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
July 27, 2017 03:37 ET (07:37 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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