IOCs enhanced resilience at low oil prices in 2018

19/02/2019 | 16:14 GMT

London |
Despite the 40% decline in oil prices in the fourth quarter in 2018, International Oil Companies (IOCs) have reported increased production of hydrocarbons ranging from 1-23% including major oil firms. Among those oil producer, which reported their results, is OMV which achieved the highest increase in production by 23% to 427 thousand bbl/d. Although this total production is small compared with the production of major oil companies such as Exxon, BP, and Chevron, it is the largest increase on a percentage basis. Chevron achieved another large increase in production by 12% given its increased investments in the US shale oil industry. BP also achieved a large increase of 8.2%, to 3.7 million bbl/d, followed by Exxon with a 5% increase and Equinor with 2%.
The Austrian Oil Company, OMV, also reported declining production costs down to $7/bbl, a 20% decrease. This was associated with a declining refining margin down to $5.2/bbl, a decrease of 13%. Furthermore, the total refined product sales have reached 20.3 mTon with an increase of +2%. On the other hand, Eni, the Italian Oil firm, achieved a net profit of €499 million in the fourth quarter of 2018, which is down by 76% compared to the fourth quarter of 2017.

Q4 Production
ConocoPhillips also achieved growth in production by 94 million boe/d, up by 7% compared with Q4 2017, which has been realised from unconventional resources in Europe and Alaska which enabled the company to offset declining production from existing mature fields. New unconventional projects include GMT-1 (Alaska), Aasta Hansteen (Norway), Clair Ridge (North Sea), the Bohai Phase 3 (China) and the final phase of Bayu-Undan (Australia).
Shell’s increase in production has been the lowest at only 1% due to their shift to gas production, with reported full-year earnings of $21.4 billion. Still, major oil companies such as Lukoil is to release their performance results later in March 2019.
The fourth quarter of 2018 witnessed a major decline in oil prices from $84.98/bbl to 53.3/bbl1for ICE Brent, and from $75.30/bbl to $45.33/bbl for WTI. However, oil firms showed more resilient strategy towards managing low oil prices compared with 2014 when prices collapsed to less than $30/bbl for ICE Brent, with more new strategies including selective investments, and divestments and less profitable projects which enabled IOCs to cope with an oil price at $50 a barrel. With such enhanced strategies, 2019 is expected to be an important year if oil prices continue to increase which may enable IOC to increase their investments into the industry which has seen declining investments over the past five years.

Categories: Companies, Oil, YA