Price Fall Hastens Decline Of 'Big Oil' As Western Majors Retreat

To keep up such payments, majors are effectively eating into themselves and will have to sell tens of billions of dollars worth of additional assets in the next years, according to banking and oil industry sources.

In recent years they have been able to borrow cheaply - all of the majors but Exxon are paying out dividends at a higher yield than their cost of borrowing. But if historically low interest rates go up they will no longer be able to fund their dividend payouts with ever more debt.

One way to maintain their stature might be to merge. The last collapse in oil prices at the end of the 1990s triggered the wave of oil mega-mergers that produced the present big seven, when BP bought Amoco and Arco, Exxon bought Mobil and Total bought Elf and Fina.

That seems unlikely to be repeated.

"I think most easy mega-mergers have been already done. It is difficult to see French Total and Anglo-American BP opting to merge," said a senior mergers and acquisitions banker at a top Wall Street bank, who asked not to be named.

Reid from BMO agreed: "Majors' strategies today are all about capital discipline and free cash flow, not mega mergers".

(Additional reporting by Sam Wilkin; Editing by Peter Graff)


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steve from virginia  |  October 10, 2014
"Meanwhile the engine of todays growth in oil output - the U.S. shale oil boom - is driven mainly by mid-sized and small producers such as Anadarko, Apache, Occidental and Devon ... " These companies arent doing any better than the majors. Per-well costs have never been higher -- particularly where fracking is required to release oil/condensate. Technology isnt that new ... its just customers are more desperate, giant fields are depleted. Now, the same customers are flat broke, so too are the drillers. Majors have been looking offshore = that has been a disappointment from Kazakhstan to Brazil. Arctic looks to be off-limits -- Russias $600 million Kara Sea well = uneconomic at anything close to todays prices ... much less tomorrows.
Alberto Knox  |  October 10, 2014
Interesting article. i get so caught up in little details of my little corner of the world that I lose sight of the bigger picture. This article is actually comforting to me. I was a little panicked by the precipitous drop in prices. Now i think it might not be that bad for me. I havent seen a dorp in business yet and I just might not.