almost 4 years ago • 2 mins
Chevron and Exxon – the most valuable Western oil producer – reported first-quarter updates on Friday that laid bare the mess the oil industry’s just stepped in 🙄
There was big news for both big-hitters: Exxon unexpectedly announced its first quarterly loss in 32 years, while Chevron announced a better-than-expected first quarter, having, perhaps counterintuitively, increased its oil production to a record level.
The oil markets have been weighed down lately, both by low demand as a result of shrinking economic growth and by under-pressure oil prices as a result of overproduction and a lack of storage 🛢 So oil companies all over the world are looking for ways to limit losses and save cash. Exxon and Chevron are no exception: the former announced a 30% cut to its spending plans, while the latter announced its second cut in six weeks. Luckily for investors, neither has cut its sacrosanct dividends – yet.
Given the low oil price, Chevron might’ve preferred to produce less of the dusky fluid last quarter. But an oil rig in motion is a hard (and expensive) thing to stop. Exxon faces similar challenges: it's spent billions sourcing oil around the world, and the company's been left holding a very expensive baby it now can’t sell on for as much 👶 All that baby-holding might be why the US government’s now considering a bailout cradle for the entire industry.
European oil major Shell cut its dividend last week for the first time since World War II, and other oil firms are likely to follow suit. But rather than take it as a negative sign for the oil industry as a whole, analysts at Goldman Sachs reckon it’ll throw up new opportunities altogether 🌎 Their report on Friday suggested lower dividends and, as a result, more financial flexibility could lead to more mergers and acquisitions – particularly in the renewable industry.
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