for Oil Majors
Exxon and other oil majors are still giving the green light to a handful of complex and risky but potentially highly profitable projects offshore, while at the same time increasingly shifting more resources into safer, smaller-scale shale drilling.
Oil majors are now cash flow neutral with oil prices trading around $50 per barrel, a milestone achieved after relentless cuts to spending and payrolls over the past couple of years.
After two years of seeing spending contract, the oil industry is poised to boost capex in 2017, but some warn that may not be enough to keep a shortfall from occurring in the future.
Third quarter earnings figures for the oil majors reveal a mixed picture for the industry: Companies are dealing with more debt, weaker refining margins, and deeper spending cuts, but they are also experiencing increased optimism that the worst might be over.
Exxon has dismissed the probes of its accounting practices as unwarranted and politically motivated, but they could mark a watershed moment for the oil and gas industry.
The second quarter saw a remarkable plunge in refining margins, taking away the one source of comfort for the integrated oil majors.
The oil majors are living off of yesterday’s discoveries, and choosing to pay shareholders at the expense of future growth.
If oil prices do not rebound substantially, the oil majors will not be able to keep up such high levels of spending and still offer shareholders such generous dividends.
The decline in oil prices that began in mid-2014 has wreaked havoc across all different types of companies in the industry, and there seems to be no respite in the short run. Companies are continuing to lay off staff, cut back on projects, and report eye-opening losses.
Consumers may be enjoying the current low prices, but as oil companies are steadily pushed into more and more challenging geological and political environments, they should probably enjoy cheap fuel while it lasts.