Rising crude prices help oil majors report bumper crop in profits

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The world's leading oil companies published a bumper crop in profits last year as rising crude prices helped turn their fortunes around, but they remain cautious and are unlikely to rush out on a new spending spree just yet.

In a flourish of earnings reports over the past week, the picture painted by majors ranging from ExxonMobil and Chevron to BP, Royal Dutch Shell and Total has been a rosy one.

French giant Total saw its bottom line jump by more than a third, Shell's net profit tripled, ExxonMobil's fourth-quarter earnings rose nearly five-fold, Norway's Statoil swung back into the black and BP's profits soared.

In fact, "2017 was one of the strongest years in BP's recent history,"chief executive Bob Dudley of British group BP said.

Key to this success was the steady rise in crude prices in recent months, driven by a landmark deal between oil-producing countries both inside and outside the Opec cartel to reduce the worldwide glut in supply by throttling output.

Correspondingly, after falling from US$115 a barrel in 2014 to under US$35 at the start of 2016, oil prices have been rising, from an average US$44 in 2016 to US$54 last year to nearly US$70 this month.

Flush with their new-found profits, the oil majors have raised dividends and announced share buy-back programmes, eager to make it up to their shareholders who have become restive after having to do with meagre payouts for years.

But it is still a far shot from the heady days of old.

Companies have learned to live with low oil prices, slashing costs and investment to become leaner and fitter, and said they have little intention of abandoning that regime any time soon.

Shell's chief executive officer (CEO) Ben van Beurden said he now always works on the assumption that oil prices would remain "lower forever".

Total CEO Patrick Pouyanne said: "We are sticking to the cost-cutting programmes, despite the rise in crude prices."

Such prudence is evident in the only modest uptick in investment in upstream exploration and production activities.

Globally, these investments rose by 4 per cent to US$389 billion (S$517 billion) last year and should increase by a modest 2 per cent to 6 per cent again this year, according to estimates published by IFP Energies Nouvelles this week.

By comparison, the amount totalled US$683 billion in 2014.

Developments vary from region to region, and the anticipated growth this year is driven almost entirely by independent companies and United States shale firms, whose overheads are much lower.

The majors, for their part, expect to cut investment in exploration and production by 16 per cent this year.

"There has been a sigh of relief across the boardrooms of the global oil and gas companies as higher prices have boosted results significantly," said Mr David Elmes, energy specialist at the Warwick Business School.

"But there is also a hesitancy and uncertainty about the longer term which is tempering any return to full speed ahead," he said. - AFP