European oil and gas firms Eni, Total and Statoil all revealed in their latest financial results that they are looking to cut costs due to the continued low oil price environment, according to reports.
Italian energy company Eni stated that it expects to carry out a number of initiatives intended to reduce capital spending, in order to cope with the slump in crude oil prices, including re-phasing and rescheduling capital projects, being more selective with exploration plays and renegotiating contracts for the supply of capital goods.
Eni forecasts a 20% reduction in spending for the full year as a result of these changes.
Oil and gas analysts at investment bank Jefferies stated that Eni is increasingly relying on divestitures in order to prevent a dividend cut, adding that the company expects to make more than $7bn worth of divestments from 2016 to 2019.
The majority of asset sales should come from upstream, according to Jefferies, with equity in Area 4 offshore Mozambique likely to get sold first.
French integrated oil and gas firm Total echoed Eni’s stance and vowed to lower its breakeven price, stating that it expects the market to remain volatile. Total is currently in the middle of a cost reduction programme which it said was ahead of schedule. The programme is aiming to achieve $4bn in savings by 2018.
Jefferies highlights that Total’s 2016 organic capital spending is now expected to be $18bn, which is the low end of prior guidance, while operating cost reductions should exceed $2.7bn in 2016.
Norwegian energy company Statoil said it expects to deliver efficiency improvements with pre-tax cash flow effects of around $2.5bn from 2016. The exploration and production firm stated that its ambition is to keep its unit of production cost in the top quartile of its peer group and revealed that it would be lowering its capital expenditure guidance for 2016, from $12bn to around $11bn.
Eni reported a Q3 adjusted operating profit of $282mn, which marked a 66% reduction year-on-year. The company’s hydrocarbon production stood at 1.71mn boepd, up 0.4% in the quarter. Total’s adjusted net income in Q3 was $2.1bn, down 25% year-on-year, and its total production for the period was 2.4mn boepd. Statoil’s met operating income was $737mn, down 16 percent year-on-year, and 1.8mn boepd.
Bucking the trend of its peers, Portuguese energy firm Galp Energia is likely to beat its 2016 guidance, according to Jefferies, who states that the company now has one of the strongest balance sheets among the European integrated oil company field.
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