On Tuesday Norway’s Statoil posted worse than expected third-quarter core earnings and said it would continue cutting costs by slashing capital expenditure by a further $1 billion to $16.5 billion.
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The drop is forcing companies to reconsider the economics of projects.
BP’s net profit dived 64 percent to $46 million in the three months to September, compared with $1.29 billion a year earlier.
“Our financial framework is highly competitive, with balance sheet gearing at 12.7 per cent similar to year ago levels, despite a halving of oil prices”.
Declining to say if there has been any specific progress on talks for potential projects, Van Beurden said Shell is still awaiting details on new contract terms to assess the “risk and rewards” of going back to invest in the country. At the prices it saw this past quarter, it’s hard to imagine any company generating a profit.
Shell’s about-face is among the industry’s starkest.
Shell’s Canadian oil sands project called Carmon Creek, which could have pulled up 80,000 barrels of oil equivalent a day, became too costly as crude prices sank.
The cost of those decisions was steep, though.
Adjusted for these one-time items and inventory changes, profit dropped 70% to $1.77 billion, The Hague-based Shell said Thursday in a statement.
He also insisted the firm was taking the right steps in a challenging period for the oil industry.
With pipeline projects mired in environmental battles and oil prices trapped below $50 a barrel, Royal Dutch Shell announced Wednesday it is halting its oil sands project in Canada. Reduced costs and a 3% increase in production volumes weren’t enough to offset the impact of weaker prices, the company’s sizable write downs and a higher tax bill. Several multibillion-dollar plans for Canadian oil, including Enbridge Inc.’s Northern Gateway and TransCanada Corp.’s Keystone XL, are awaiting necessary clearances to start building, years after they were first discussed.
Companies are also tapping the debt market, benefiting from a relatively low debt ratio that will allow them to cover spending and dividend payments that, except for Eni, have remained unchanged.
Crude price has been under pressure after two straight weeks of losses, on worries that the oversupply in oil products would swell from unseasonably warm weather and the waning maintenance cycle for US refineries.
Brent crude will average US$70.42 that year, according to analyst estimates compiled by Bloomberg, and traded at about US$49 today.
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The company had a total stock market value of $113 billion as of Wednesday’s close, so a Pfizer acquisition likely would have a price tag well above that figure.
