Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  BP    BP.   GB0007980591

BP (BP.)
My previous session
Most popular
News SummaryMost relevantAll newsOfficial PublicationsSector newsMarketScreener Strategies

Big Oil still reluctant to open spending taps: Goldman

share with twitter share with LinkedIn share with facebook
share via e-mail
10/11/2018 | 04:42pm CET

LONDON (Reuters) - Energy companies and investors are focused on profits and reluctant to boost spending even after crude prices surged to four-year highs, a senior Goldman Sachs banker said on Thursday.

Rattled by the recent downturn in the sector and long-term concerns over oil demand and the switch to renewables, Big Oil is facing an unprecedented challenge.

"We're firmly through that survival phase and the better capitalized players are now positioned to do well on the other side of it," Andrew Fry, global head of energy at Goldman said at the Oil & Money conference in London.

Companies typically seek to increase spending as they emerge from a downturn in order to capture low drilling costs and an expected supply shortage.

But this time round, the barriers for investments are high, with investors seeking returns of as much as 15 to 20 percent from multi-billion dollar oil and gas projects, Fry said.

"In the near term the focus is on returns as opposed to growth for the sake of growth," he said.

As a result, companies are currently focusing on buying back shares and paying dividends to investors with the excess cash they generate.

"For the first time since the downturn, the oil companies now have their balance sheets in order. They are all starting to think about growth but it is very conservative," James Janoskey, global co-head of oil and gas at JPMorgan, said.

"When we came out of downturns in the past, we didn't have energy transition issues and there probably wasn't that much pressure from investors."


Capital expenditure among the world's top oil companies is expected to rise to $140 billion by 2021, from the current $100 billion, but will remain well below the $200 billion before the 2014 oil price collapse, according to Adam Brett, HSBC global head of natural resources advisory. 

That means oil majors will show very healthy returns on capital invested, he added. 

He said that even in the United States, where oil output has resumed spectacular growth on the back of high oil prices, large companies will try to maintain capital discipline and focus on returns rather than pure production growth.

"For Big Oil, value will prevail over volume," Brett said, adding that most remuneration reports now made clear that top executives at oil majors are being rewarded for delivering robust cash flows rather than production increases.

Acquisitions, another way to boost production and reserves, are also expected to be constrained and focused.

Energy mergers and acquisitions amounted to $360 billion last year and stand at $280 billion so far this year, said Brett.

Although the volume of M&A has been relatively stable in recent years, the structure has changed since China largely suspended its buying spree over the past three years, he said. 

An anti-corruption drive and revisions of overly expensive deals have prompted China to cut down on buying resources around the world in the past three years. 

Brett said that M&A were currently dominated by downstream and mid-stream transactions with the share of upstream declining to 35-40 percent, from as high as 60-70 percent when China was an active asset buyer. 

"You see much more downstream M&A activity. And I expect this to continue in the years ahead," Brett said.

(For graphic on oil companies spending, click https://tmsnrt.rs/2CqZfMP

(Reporting by Ron Bousso; Editing by Susan Fenton)

By Ron Bousso and Dmitry Zhdannikov

Stocks mentioned in the article
ChangeLast1st jan.
BP -0.06% 516.5 Delayed Quote.-1.19%
CHEVRON CORPORATION 0.13% 115.62 Delayed Quote.-7.64%
ENI 1.21% 14.236 End-of-day quote.1.93%
EQUINOR 0.66% 198.15 Delayed Quote.12.36%
EXXON MOBIL CORPORATION -0.86% 76.02 Delayed Quote.-9.11%
ROYAL DUTCH SHELL 1.04% 26.14 Delayed Quote.-5.92%
TOTAL 1.48% 48.47 Real-time Quote.5.27%
share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on BP
12/11LONDON MARKETS: FTSE 100 Climbs, Led By Jump In WPP
12/11BP : announces plans on drilling new wells in Azerbaijan for 2019
12/10BP : Shell to battle it out on climate resolutions
12/10LONDON MARKETS: FTSE 100 Dragged Lower As U.K.'s May Delays Brexit Vote
12/10BP : Board changes
12/10BP to Consider Climate Resolution from Activist Investors for 2019 AGM
12/10Shell to go ahead with Shearwater gas expansion in North Sea
12/10BP : Egypt Approves BP, UAE Mubadala Acquisition of 45 Percent Stake in Eni's No..
12/10BP : Q3 2018 Payment of dividends in Sterling
12/10BP targeted with first shareholder resolution on climate goals
More news
Financials ($)
Sales 2018 308 B
EBIT 2018 21 720 M
Net income 2018 11 488 M
Debt 2018 41 136 M
Yield 2018 6,18%
P/E ratio 2018 11,44
P/E ratio 2019 10,14
EV / Sales 2018 0,56x
EV / Sales 2019 0,53x
Capitalization 130 B
Chart BP
Duration : Period :
BP Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends BP
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 8,20 $
Spread / Average Target 27%
EPS Revisions
Robert W. Dudley Group Chief Executive Officer & Executive Director
Carl-Henric Svanberg Chairman
Andy Hopwood Group COO, Executive VP-Strategy & Regions
Brian Gilvary Group Chief Financial Officer & Executive Director
David Eyton Group Head-Technology
Sector and Competitors
1st jan.Capitalization (M$)
BP-1.19%130 210
SUNCOR ENERGY INC.-11.51%49 367