for Oil Majors
Oil majors may not be entirely out of the woods yet, but first-quarter performances suggest that they are on the upswing after nearly three years of mostly red ink.
If oil demand were to peak, the industry would likely see a good bit of consolidation, but the situation would not bring about a collapse.
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.