Apr 29 | 2020
(Global) Producers Face ‘Significant Losses’
With the release of initial first quarter results by oil and gas majors this week, deep losses are predicted to drag the sector down further.
BP was among the first oil majors to announce results, posting a drop in profits of two-thirds. Profits slipped from US$2.4 billion in the first quarter last year to just US$800 million this year.
“Our industry has been hit by supply and demand shocks on a scale never seen before … we are taking decisive actions to strengthen our finances – reinforcing liquidity, rapidly reducing spending and costs, driving our cash balance point lower,” said Bernard Looney, CEO of BP.
Eni Slides 94%
Revenues shrank rapidly on the back of plunging oil prices and the trend is expected to be repeated across the sector. Italian firm Eni reported a 94 percent drop in profit in the first quarter, a decline that is unlikely to reverse in the coming quarters.
“The period since March has been the most complex period the global economy has seen for more than 70 years … Like everyone, we expect a complicated 2020,” Eni CEO Claudio Descalzi said.
The prospect of long-term low oil prices is forcing many oil majors to scramble to raise additional capital with large-scale asset sales planned. U.S. major Chevron this month announced the sale of its Azerbaijan assets to MOL Hungarian Oil and Gas.
Chinese producers are set to be among the first to be hit, as several of the country’s larget banks are reported to have put a halt to commodity-linked investments as a result of billion-dollar losses.
The close integration of state-controlled finance and oil production in China has meant a rapid deceleration in spending.
“We’re expecting very significant losses in the first quarter for PetroChina and Sinopec as a result of the low oil prices …. The problem with some of the Chinese producers, I’ve heard, is that it’s very difficult, given that these are state-owned enterprises, to cut costs as aggressively as private sector companies,” saidNeil Beveridge, analyst at research firm Bernstein, in comments to media agency CNBC.
Subscribe to BreakbulkONE and receive more industry stories and updates around impact of COVID-19.