Oil majors trapped in cycle of spending more but finding less

Oil majors trapped in cycle of spending more but finding less
# 12 August 2013 15:19 (UTC +04:00)

Baku. Agshin Rafigoglu - APA-Economics. For the oil majors, quarterly results were once a ticker-tape parade. Last week, they were more like a walk of shame. ExxonMobil, Chevron, Royal Dutch Shell, BP, and Total all suffered a drop in earnings year-on-year. Oil and gas output for all, bar Total, contracted, despite big hikes in capital spending. Costs were up and returns down – even with oil prices at more than $100 a barrel, APA-Economics reports quoting Financial Times.

Companies that just a few years ago bestrode the corporate world like colossi are now in the doghouse, unloved by investors and dismissed by many as dinosaurs.

The reasons for the majors’ poor performance in the second quarter were often specific to the company. Shell, ENI and Total were hit by oil theft and pipeline sabotage in Nigeria. A higher tax rate and foreign exchange effects took their toll on BP. Exxon was affected by weaker refining margins, Chevron by higher repair costs at its US refineries.

That is happening because companies are pushing into ever more remote, technically challenging and more capital-intensive frontiers. Canadian tar sands, US tight oil, Brazil’s deepwater “pre-salt” discoveries and the offshore Arctic are all proving much more expensive to develop than more conventional fields in places like the Middle East.

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