for Oil Majors
The oil majors are posting their best quarterly figures in years, an indication that they are adapting to the new price environment. After several years of spending cuts and rising debt, the largest integrated oil companies have turned a corner.
The glut of supply could last years, threatening to keep prices low until the 2020s, but the oil majors are playing the long game, expecting the demand for gas to grow substantially over time.
Independent producers are struggling to hit output targets at current price levels while the majors are focusing on becoming more efficient.
With existing production facing a stiff market, new oil sands projects might remain too risky for most companies. Suncor Energy’s strategy of handing over much of its cash flow to investors is a sign that oil sands face a rocky future.
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.