Over the past week, the international oil companies such as Shell, Total, Chevron, Exxon Mobil, and BP have successively released their first-quarter earnings reports. The overall performance has been dazzling. These international oil companies had achieved their business performance basically at the oil price of US$80 to US$100 per barrel in 2014 when the international oil price range of US$65 to US$70 per barrel.
In the first quarter, Shell achieved a profit of 5.7 billion U.S. dollars, a year-on-year increase of 42%. This level was previously achieved from the second quarter of 2014 to the third quarter. Statoil achieved the highest level of profit in the first quarter of the four-year period. The first-quarter profits of companies such as BP, Total and Chevron also reached or approached the profit level at the end of 2014 when the oil price was 80 US dollars per barrel.
The cash flow is a vital indicator which can reflect the operating quality of oil companies and the future sustainable development. ExxonMobil’s cash flow from operations and asset sales of the first quarter reached to $10 billion, which is the highest level since 2014. Some market analysts pointed out that the “steady” cash flow performance has increased much confidence to market investors. The cash flow of other major oil companies in the first quarter was also flat or slightly higher.
The return of first-quarter performance was faster than the recovery of oil prices, which to a certain extent reflected the increase in the competitiveness of major international oil companies. The performance reports mentioned several reasons at the same time: the recovery of crude oil prices and natural gas prices, the optimization of asset allocation, the improvement of operating efficiency, and efforts to reduce costs and expenditures. The latter ones are all derived from the practice of low oil prices.
In the past four years, the international oil companies have maintained their development and focused their efforts on building advantageous areas. Operational costs have been reduced by 30%, and investment in various types of innovative technologies and applications have greatly improved operating efficiency.
The agility and elasticity of the strategic adjustment of the international oil companies are worthy of attention in the first quarter. Take the upstream as an example. Except for the slight decrease of Exxon Mobil production, the major international oil companies have rebounded significantly from the oil and gas production. Those measurements - acquisitions of new blocks, reopening of the old oil fields, and exploration into the deep sea etc. have provided support for production recovery.
This year, Chevron, Shell, Total and other companies have ushered in the turning point. As oil prices continue to strengthen, fields adjust their strategies timely and the profit effect is quickly reflected in the performance report.
China's domestic major oil companies have not yet completely reversed the decline in their production in the first quarter. The performance is still far from the era of high oil prices. The flexibility of foreign strategic adjustments is worth considering.
Zhang Weizhong, director of the China Petroleum Economic Research Institute - Institute of Development Strategy, believes that current international oil company earnings growth is higher than expected, but with the further rise in oil prices, structural costs will increase, its growth rate will slow down. Domestic oil companies need to make rigorous research and judgments, accurately grasp market trends, adjust investment strategies, and focus on current upstream asset mergers and acquisitions markets to seize the window of profitability of different businesses in the industry chain.