The coronavirus pandemic hurt earnings of oil giants in the first quarter of 2020, with second-quarter earnings expected to get even worse. There were some signs of recovery as some countries began to ease their restriction measures. However, major oil and gas producers were united that this quarter will be worse than the first.
ExxonMobil posted its first loss in more than three decades. However, it said it would keep its dividend payments to investors. Fellow US producer Chevron also echoed Exxon’s unwavering drive in maintaining the dividend. British oil major BP said it would review the dividend payout every quarter.
On the other hand, Royal Dutch Shell has decided to cut its dividend by two thirds, marking the first dividend cut since the Second World War. Generous dividends have long been oil giants’ main attraction to investors. Italy’s Eni said it would provide guidance on the dividend by July.
Some of those companies’ CEOs have said that they would produce less oil and gas in the second quarter, driven by low prices and OPEC-led supply cut agreement. US producers ExxonMobil, Chevron, and ConocoPhillips, have pledged a combined output reduction of 660,000 bpd by the end of June. Meanwhile, Shell is removing rigs from the Permian Basin.
BP said OPEC+ members such as Middle Eastern countries, Russia, Angola, and Azerbaijan had contacted the company to reduce crude production. Iraq has asked BP to cut production from Rumaila field by 90,000 bpd. The company is also removing rigs from the Permian Basin and cut planned spending by $1 billion.
Kazakhstan plans to meet its 390,000 bpd cut by forcing foreign oil firms to slow down production. This may affect Shell, Eni, and Chevron, according to people familiar with the matter. Non-OPEC producer Norway also plans to cut output this year, resulting in Equinor abandoning its 7% growth target for this year.
Bloomberg reported that combined cash from operations from the five largest oil companies slumped 29% year-on-year to $27 billion in Q1 and cannot cover dividend payout, interest payments, operating costs, and investments. This calculation came when Dated Brent averaged about $50/barrel. It averaged less than $20 so far in Q2.
