Integrated oil companies such as Imperial Oil Ltd., its parent Exxon Mobil Corp., and BP PLC are made to be resilient to market downturns, thanks largely to downstream operations that offset upstream woes. But Tuesday’s fourth-quarter results show even they’re taking a savage beating from the fall in prices C in Canada, Imperial collected under $23 a barrel because of its bitumen throughout the period – and that they are continuing to move forward with extreme care in 2016.
Imperial Oil Ltd fourth quarter profit plunges 84% on low oil prices
Imperial Oil Ltd., the Canadian affiliate of Exxon Mobil Corp., said profit in the fourth quarter sank as oil remained near 12-year lows amid rising production.
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The takeaway is the fact that investment cuts that started slowly this past year, as crude prices began their decline and accelerated and deepened as prices sank further, continues mercilessly until there is confidence in a recovery, which so far remains invisible.
“We are price-takers,” Jeff Woodbury, Exxon’s vice-president of investor relations, said in a call with industry analysts. “We will continue to reside within our means, once we show historically, and we will tighten up if we have to further. We have flexibility for both.”
Exxon and Canadian affiliate Imperial Oil, after many years of heavy spending within the oilsands, are intending shoestring budgets this season.
Imperial is likely to spend a paltry $1.8 billion in its all-Canadian operations in 2016, down from $3.6-billion in 2015.
The Calgary-based company managed to eke out an income for the quarter C $102-million C down from $671 million in the same period in 2014, as it boosted production to 400,000 barrels of oil equivalent a day, from 315,000 boe/d in 2014, with the expansion of the Kearl oilsands project.
Imperial said hello reduced its cash costs per barrel by 25 % and that it cut overall operating and capital costs by $1.5-billion last year relative to earlier plans.
Looking ahead, it’s keeping its powder dry. “We will evaluate the pace and scope of future investments considering overall market and business conditions,” the Calgary-based company said in a statement.
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RBC analyst Greg Pardy said Imperial’s $1.8 billion capital program, including $1.2 billion of maintenance capital, is “ankles and knees underneath the $3 billion” he expected. The company won’t be living large within the next four years, either, with expected average annual expenditures of $2.5 billion.
Irving, Texas-based Exxon is reducing spending to about US$23.2 billion this season, down nearly US$8 billion from 2014, and from a peak of US$42.5 billion in 2013. It reported Tuesday its smallest quarterly profit in additional than the usual decade C US$7.1 billion, down from US$27.5 billion in 2014.
In Canada, the super major said it looks at growth opportunities in Alberta’s Duvernay shale, where it has added 10,000 net acres, in offshore Newfoundland, where it acquired 652,000 net acres, and that it remains optimistic about the long-term worth of the oilsands.
“No doubt profitability is compressed within this price environment,” Woodbury said. “The team in Canada have done an exceptional job in driving the cost structure down and in enhancing reliability. We’re not by any means where we want to be – we will continue to work that.”
BP, the London-based British oil major with oilsands holdings in Canada, is planning capital spending in the budget of a US$17 billion to US$19 billion range, after reducing spending to US$18.7 billion in 2015 from a planned US$24 billion to US$26 billion.
The company said hello reduced operating costs by US$3.5 billion this past year and that it expected savings to reach US$7 billion by 2017.
The company had its biggest annual reduction in 2015 in at least 3 decades – US$6.5 billion – and announced thousands more job cuts , for any total of seven,000 jobs to become eliminated by the end of 2017.
In your fourth quarter, BP turned an income of US$196 million adjusted for one-time items and inventory changes, down from US$2.2 billion in fourth quarter of 2014.
As rocky because this downturn continues to be, Exxon still sees it as a cycle which will fix itself, just as it did previously, rather than the dawn of a long-term decline.
Demand has been growing about a million barrels a day per year, Woodbury said, thought insufficient to utilise 1.5 million barrels a day of excess supplies, resulting in a build up in crude storage. “We expect that to converge within the second half as seasonal demand increases,” he explained.
If it does, it’ll still be a long time before big spending returns to producing regions like Alberta, the reason a lot of are worried the sector will stay asleep for years.
Financial Post
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