Three years into a dramatic slump in oil prices, big oil companies seem to have adapted their businesses to a point where they can still generate cash and reduce debt levels even at current oil prices.
European oil giants Royal Dutch Shell PLC, Total SA and Statoil ASA kicked off the sector’s second quarter earnings Thursday season with a flurry of reports that highlighted growing cash flow and sustained profits.
Though notably better than at the start of 2016 when the price of crude plummeted to $27 a barrel, oil is still more than 50% weaker than in 2014 when prices started to fall. The supply glut that sparked the crash has proved stubbornly persistent despite efforts by the Organization of the Petroleum Exporting Countries and other major producers to limit output, prompting several large banks to cut their oil price forecasts in recent months.
Still, the European oil companies struck a confident if cautious note in their second quarter filings, trumpeting falling debt levels and strong cash flow–a metric that has become increasingly important to investors and analysts worried about ballooning debt and dividend security in the wake of the oil price crash.
Shell’s profit rose to $1.9 billion in the second quarter and its cash flow from operations soared to $11.3 billion. The company said it has generated $38 billion of cash from its business over the last 12 months, enough to cover dividend payments and bring down debt levels.
Total’s profit for the quarter was stable but the company also reported a significant increase in cash flow and reduced gearing. Statoil swung to a profit of $1.4 billion in the period after reporting a loss of $302 million in the same period in 2016. The company said it generated $4 billion in free cash flow and reduced net debt by 8 percentage points since the start of the year, despite oil prices remaining around $50 a barrel.
more at: http://www.marketwatch.com/story/oil-majors-sustain-profits-despite-crudes-slide-2017-07-27