Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Men rest near oil rigs on a beach in Baku. Top oil companies have slashed oil production rates as the coronavirus pandemic caused a drastic fall in fuel prices. (AFP)
Short Url
Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.


Turkish lira slides to record low of 8 against dollar

Updated 26 October 2020

Turkish lira slides to record low of 8 against dollar

  • The lira has lost 26 percent of its value against the dollar since the start of the year
  • The Turkish currency also recorded its lowest level against the euro, trading near 9.52

ANKARA: Turkey’s lira on Monday set a new record low against the US dollar after the central bank refused to raise its main interest rate and tensions increased sharply with the country’s Western allies.
The lira was at 8.03 against the dollar at around 0730 GMT, suffering a loss of nearly one percent since the start of the day.
The Turkish currency also recorded its lowest level against the euro, trading near 9.52.
The lira has lost 26 percent of its value against the dollar since the start of the year.
Turkey’s central bank last week upset the markets which had expected a 175 basis points hike to the one-week repo rate.
The bank opted instead to keep the rate unchanged at 10.25 percent despite market concerns over persistently high inflation, which remains in double-digits, and worries about a sharp drop in foreign currency reserves.
Consumer price inflation was 11.75 percent in September.
The bank’s governor will deliver the quarterly inflation report on Wednesday in Istanbul.
The lira’s decline comes at a time of strained relations with NATO allies including France, Greece and the United States over multiple issues.
Turkish President Recep Tayyip Erdogan angered Paris after he said his French counterpart Emmanuel Macron needed to have “mental checks” at the weekend.
France responded by recalling its ambassador to Ankara and on Saturday described Erdogan’s comments as “unacceptable.”