AUTONEWS

Investors in oil giants should accept 1trillion coup and focus on dividends

LONDON / HOUSTON (Reuters) - Investors who are already preparing for poor results for the biggest oil and gas companies in the first quarter of this year will focus on how executives at these companies plan to save money and the possibility of dividend cuts after the collapse in oil prices.
The five largest companies in the United States and Europe, known as "Oil Majors", announced spending cuts of an average of 23%, in a rapid response to the free fall in demand for oil in the face of the coronavirus pandemic and the 65% decline commodity prices.
With the probable continuation of this trajectory for months, the pressure on the balance sheets remains extreme, since very few oil companies make money from the current fossil fuel prices, 20 dollars per barrel.
"This business environment remains brutal," BP Chief Executive Bernard Looney said on Thursday.
From Exxon Mobil to Shell, companies have suspended projects, cut production in shale fields (unconventional oil) in the U.S. and reduced operations at refineries to deal with the "double hit" of falling demand and oversupply.
But more measures are likely to be needed, and investors will be closely watching changes in production estimates and the ways companies plan to manage dividends, the most important incentive for shareholders who, together, last year totaled more than 40 billions of dollars.
"Looking back at what was a weak first quarter seems almost irrelevant. The game plan to deal with the next three months and the next 18 months is what will be the focus," said Jason Gammel, an analyst at Jefferies.
BP will be the first of the "Oil Majors" to release its first quarter results on Tuesday. Shell comes next on Thursday. Exxon and Chevron present balance sheets on Friday, and France's Total on May 5.
Italian company Eni reported on Friday a 94% drop in net profit and reduced its projections of spending and pumping, while Norwegian Equinor will release results on May 7.
Oil service providers, such as Halliburton, Schlumberger and Baker Hughes, also took a hard hit on profits in the first quarter.

(Additional reporting by Felix Bate, Paris)