Higher oil prices and surging profits in the second quarter are giving them a lot more leeway, definitively putting an end to years of austerity.
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.
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.
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.