x Abu Dhabi, UAESaturday 22 July 2017

Price drops take a toll on oil firms

Declining oil and gas prices hit the world's largest energy companies in the second quarter.

Declining oil and gas prices hit the world's largest energy companies in the second quarter.

Brent, the benchmark for crude traded into Europe, has fallen by about 10 per cent since January, trading at US$103 a barrel after sliding below the $100 mark last month.

Sentiment on global energy markets has weakened on expectations of slow growth in the world economy and a receding threat that Iran will disrupt oil exports from the Arabian Gulf.

At the same time, a surge in production in North America is depressing natural gas prices.

Royal Dutch Shell, Statoil and BG Group all released quarterly results showing leaner profits yesterday.

ExxonMobil, the world's largest oil company by market capitalisation, stood out among its peers by bucking the downward trend with the US firm increasing its profit in the second quarter by 49 per cent to $15.9 billion (Dh58.4bn). Excluding one-off gains from tax items and divestments, however, profits stand at $8.4bn, less than the $10.6bn earned a year earlier.

Profits at Shell, one of Europe's biggest oil companies, fell 13 per cent to $5.7bn. Maintenance work on oilfields and at its gas-to-liquids plant in Qatar added to the company's worries, which also include sluggish demand in stalling economies.

Driven by the application of new production techniques in the so-called shale-gas revolution in the United States and Canada, natural gas prices have also plunged. According to a report by Crédit Agricole, returns on natural gas investment fell by more than 50 per cent. About half of Shell's upstream portfolio is in natural gas.

Falling gas prices were also behind reduced profits at BG, a UK gas producer. Net income fell by two-thirds to $238 million as the group had to take a $1.3bn impairment on US assets due to lower gas prices.

Statoil, Norway's largest hydrocarbon producer, largely offset falling oil and gas prices with increased production and its profits only fell 2 per cent to $4.35bn.

Production rose 17 per cent from the same quarter last year, according to Helge Lund, Statoil's chief executive. The company received about $99 per barrel in the second quarter, down from about $112 a year earlier.


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