Bloomberg News: SATURDAY, APRIL 23, 2016
The world’s biggest oil companies, set to report their worst quarterly earnings in more than a decade, are finding that their cost-cutting efforts haven’t matched the decline in crude prices over the past two years.
While producers have been deferring projects, eliminating jobs and freezing salaries, the process will take three years to complete, according to Barclays oil sector analyst Lydia Rainforth. In the meantime, profits are being hammered.
“A lot of work still needs to be done on costs,” she said. “It’s a reflection of how much costs had piled up and how long a process this is.”
For producers from Royal Dutch Shell to Chevron, reeling under the threat of credit-rating downgrades, slashing costs is the surest way of protecting balance sheets. Still, reversing course is proving painful after $100 oil persuaded companies to pump money into expensive areas in search of new deposits, hire more people and rent rigs and services at record rates. Productivity suffered.