Exxon, Chevron, Shell, Total, BP Set to 'Reap Benefits' of Price Recovery
ExxonMobil Corporation, Chevron Corporation, Royal Dutch Shell plc, Total S.A. and BP plc are set to “reap the benefits of a partial recovery in oil prices”, according to a new report from Moody's Investors Service (MIS).
"The five major oil companies' principal business risk is oil and gas price volatility, and they proved their fundamental strength though the depths of the oil price crash," Pete Speer, a Moody's senior vice president, said in an organization statement.
"In today's improved environment, we expect them to continue to pursue efficiencies and maintain competitive cost structures in order to reap the benefits of higher prices,” he added.
MIS revealed in the report that it foresees a five percent annual increase in capital spending for the majors next year.
“Meanwhile, improving oil prices have allowed the majors to fully fund dividends and capex from operating cash flow,” the report stated.
The report highlights that Exxon, Chevron, Shell, Total and BP have all “cut costs, slashed capital spending and divested assets, positioning their businesses to prosper in a world of range-bound commodity prices”.
“Since the price collapse, the majors have sanctioned fewer large projects and lowered their capital costs by reducing oilfield services costs and increasing efficiencies,” the report stated.
MIS said in the report that it expects the companies to continue following “conservative financial policies” to maintain flexibility to weather commodity price cycles and fund investments related to regulatory change.
“They will remain capital disciplined and cautious regarding large projects with long cycle times, while being thoughtful about long-term planning to anticipate secular shifts in demand and mitigate stranded asset risk,” the report said.
MIS describes itself as a leading provider of credit ratings, research, and risk analysis. The organization is a subsidiary of Moody's Corporation, which reported revenue of $4.2 billion in 2017, employs approximately 12,000 people worldwide and maintains a presence in 42 countries.
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