Price Fall Hastens Decline Of 'Big Oil' As Western Majors Retreat
And given that the seven majors have already sold assets worth $150 billion in the past four years, they are gradually turning from super-majors into mini-majors: still among the biggest companies in the world but no longer with the size to bend prices to fit their investment cycle.
"Oil companies are in a period of circumspection, which will only be prolonged with the oil price pullback... It is quite clear the business cannot sustain itself with Brent below $100," said Charles Whall, fund manager at London-based Investec Asset Management, which invests in Shell, Total, Chevron, Exxon and Statoil.
Last year, most majors would have needed a price of $120-130 per barrel to balance their budgets without borrowing, selling assets or cutting payments to shareholders in the form of dividends and share buybacks.
With promised spending cuts, financials were expected to be back in balance by 2016 based on average oil prices of $110 a barrel, according to Morgan Stanley, which also estimates that every $10 per barrel fall in oil prices translates into a 12 percent decline in earnings.
No Oil Price Help
An old mantra in oil markets says that when prices fall too sharply, companies respond by cutting investment, which in turn leads to an oil shortage several years down the road, helping to propel prices so companies can start a new investment cycle.
That theory may simply no longer work for oil majors.
In 2003, Exxon, Shell, BP, Total, Chevron and Eni produced 11.5 million barrels of oil liquids per day, or 14.5 percent of global output of 79.6 million bpd. Fast forward 10 years and their smaller output of 9.5 million bpd is equivalent to only 10.4 percent of larger global production of 91.6 million bpd.
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