Integrated oil companies for example Imperial Oil Ltd., its parent Exxon Mobil Corp., and BP PLC are built to be resilient to market downturns, thanks largely to downstream operations that offset upstream woes. But Tuesday’s fourth-quarter results show even they are going for a savage beating in the fall in prices C in Canada, Imperial collected less than $23 a barrel because of its bitumen during the period – and they are moving 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 within the fourth quarter sank as oil remained near 12-year lows amid rising production.
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The takeaway is that investment cuts that started slowly this past year, as crude prices began their decline and accelerated and deepened as prices sank further, will continue mercilessly until there’s confidence inside a recovery, which so far remains invisible.
“We are price-takers,” Jeff Woodbury, Exxon’s vice-president of investor relations, said inside a call with industry analysts. “We continues to live inside our means, as we show historically, and we will firm up when we need to further. We have flexibility for both.”
Exxon and Canadian affiliate Imperial Oil, after many years of heavy spending in the oilsands, are planning shoestring budgets this year.
Imperial is planning to spend a paltry $1.8 billion in the all-Canadian operations in 2016, down from $3.6-billion in 2015.
The Calgary-based company were able to eke out a profit for that 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, using the growth of the Kearl oilsands project.
Imperial said it reduced its cash costs per barrel by 25 % and that it cut overall operating and capital costs by $1.5-billion this past 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 inside a statement.
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RBC analyst Greg Pardy said Imperial’s $1.8 billion capital program, which includes $1.2 billion of maintenance capital, is “ankles and knees below the $3 billion” he expected. The organization will not 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 year, down nearly US$8 billion from 2014, and from the peak of US$42.5 billion in 2013. It reported Tuesday its smallest quarterly profit in more than a 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’s added 10,000 net acres, in offshore Newfoundland, where it acquired 652,000 net acres, and that it remains optimistic concerning the long-term value of the oilsands.
“No doubt profitability is compressed within this price environment,” Woodbury said. “The team in Canada did an exceptional job in driving the cost structure down as well as in enhancing reliability. We’re not by any means where you want to be – we will still work that.”
BP, the London-based British oil major with oilsands holdings in Canada, is planning capital spending in the lower end of a US$17 billion to US$19 billion range, after reducing spending to US$18.7 billion in 2015 from the planned US$24 billion to US$26 billion.
The company said hello reduced operating costs by US$3.5 billion last year and that it expected savings to reach US$7 billion by 2017.
The company had its biggest annual reduction in 2015 in a minimum of 3 decades – US$6.5 billion – and announced thousands more job cuts on Tuesday, for any total of 7,000 jobs to become eliminated after 2017.
In the fourth quarter, BP turned a profit 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 as this downturn has been, Exxon still sees it as being a cycle which will fix itself, just as it did in the past, rather than the dawn of the long-term decline.
Demand has been growing about one million barrels each day per year, Woodbury said, thought not enough to use up 1.5 million barrels a day of excess supplies, resulting in a develop in crude storage. “We expect that to converge in the second half as seasonal demand increases,” he said.
If it will, it’ll 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 a long time.
Financial Post
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