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Big Oil investors to look past earnings pain and focus on dividends

April 28/2020

MOSCOW (MRC) -- Investors already braced for poor first-quarter earnings from major oil and gas companies will focus on how executives plan to save cash and whether they will cut dividends following the collapse in oil prices, said Hydrocarbonprocesiing.

The five biggest U.S. and European firms, known as the Oil Majors, have announced spending cuts averaging 23% in a rapid response to the precipitous fall in oil demand because of the coronavirus pandemic and a 65% slump in crude prices.

With the rout likely to extend for months, the pressure on balance sheets remains extreme as very few parts of oil company businesses make money at the current oil price of USD20 a barrel. This remains a brutal business environment, BP (BP.L) Chief Executive Officer Bernard Looney said on Thursday.

From Exxon Mobil (XOM.N) to Royal Dutch Shell (RDSa.L), companies have put projects on hold, slashed production in U.S. shale fields and reduced operations at refineries to deal with the double whammy of a drop in demand and a supply glut.

But more steps are likely to be needed and investors will be watching closely for changes to output forecasts and to see how companies plan to manage dividends, the most important incentive for shareholders worth more than USD40 billion combined last year.

The look back into what was a weak first quarter seems almost irrelevant. The game plan for dealing with the next three months and the next 18 months is going to be the focus, said Jefferies analyst Jason Gammel.

BP will be the first Oil Major to report first-quarter results on Tuesday, with Shell on Thursday, Exxon and Chevron (CVX.N) on Friday and Frances Total  on May 5.

Italys ENI (ENI.MI) reported a 94% slump in net profit on Friday and lowered its spending and production forecasts while Norways Equinor will report on May 7.

As MRC informed earlier, Eni on Friday lowered its production guidance for 2020 and announced at least a 30% cut in planned capex for 2020 and 2021, in response to the collapse in oil prices and the economic impact of the coronavirus pandemic. The Rome-based major said it expects oil and production to average between 1.75 million1.80 million b/d of oil equivalent in 2020, down from initial forecasts of around 1.9 million boe/d for the year.
Eni said it will also cut Eur2.3 billion from 2020 capex, 30% lower than the initial targets, and anticipates further reductions of 30%-35% lower than original plans in 2021.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
Author:Anna Larionova
Tags:petroleum products, PP, PE, petrochemistry, Eni.
Category:General News
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