Oil Majors Fail To Find Reserves To Counter Falling Output

Investors have largely welcomed the focus on dividends. But some say the cuts could come back to bite the industry.

"Capex can't be cut forever. Cuts in capex are only storing up problems for the sector down the road," said Will Riley, fund manager with the Guinness Global Energy Fund, which holds shares in many of the big U.S. and European oil firms.

The ability of oil companies to replace reserves has not been as much of a concern for some executives and investors in recent years due to the shale oil boom.

But the high cost of extracting shale oil makes doing so profitably a challenge where prices are low – making traditional and less expensive reserves more relevant in a downturn.

Lost Opportunities

BP and Chevron have announced around 13 percent cuts in capex for 2015, while ConocoPhillips last week upped its planned reductions in spending for 2015 to 33 percent. Shell and Exxon have not issued budget plans yet.

"We have to prioritise cash flow instead of growth for the time being," Gerhard Roiss, chief executive of Vienna-based oil producer OMV AG, said last week as he announced an around 30 percent reduction in investment in new projects.


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