Companies Cling to Downstream Business for Decent Financial Results
Following Statoil and Total, other majors reported serious difficulties in the first half of the year, proving once more that the downstream segment is the only part of their business that achieved good results with respect to the same period in 2014.
Anglo-dutch Shell published a note with its unaudited results, reporting that cash flow from operating activities fell from $ 22,625 million to $ 13,156 million. The upstream reported a drastic fall from $ 10,432 million to $ 1,712 million (-83%), while the downstream jumped from $ 2,922 million to $ 5,607 million.
‘In Upstream, earnings were impacted by the significant decline in oil and gas prices and decreased production volumes, partly offset by lower costs and depreciation’ the company wrote on Thursday.
The dividend per share remained stable.
Similarly, Italy’s ENI suffered despite an increase in production.
‘Increased guidance for full-year production growth from 5% to over 7%’ the company reported on Thursday.
Despite the increase in production, the adjusted net profit plunged 84% to €0.14 billion for the quarter, and 62% to €0.79 billion in the first half.
"In the first half of the year we have achieved excellent industrial results across our businesses, which enable us to revise upwards several of the targets set out in the strategic plan presented in March. In upstream we delivered record production growth and we have significantly contained costs. Furthermore, the recent start-up of production in the Perla field in Venezuela, and forthcoming start-up of Goliat in Norway will provide an important contribution in the second half” Claudio Descalzi, Chief Executive Officer, commented.
Descalzi also explained that the mid-downstream businesses all reached profitability, as a consequence of increased efficiency of the refineries and successful renovations of gas contracts.
“Despite the halving of oil prices, we have generated €5.7 billion of cash flow, in line with the first half of 2014, which has financed almost all capital investment in the half year.”
Repsol’s results further confirmed the centrality of the downstream businesses for oil companies.
‘During the first half of 2015, Repsol posted adjusted net income of 1.24 billion euros, 35% more than the 922 million obtained in the first half of 2014… The quality of its industrial assets and the efficiency of processes in the Downstream business units allowed Repsol to take advantage of the improvement in international margins and offset the Upstream results, which had been affected directly by the fall in international crude oil prices and by interrupted production in Libya’ the Spain-based company wrote on Thursday.
Also France’s service company Technip reported a double-digit decrease in adjusted revenues.
“Second quarter results were in line with the expectations we set out in our July 6th announcement. During the quarter, we continued to pursue our key strategy initiatives, to position ourselves on significant new projects and we launched a major restructuring plan across the Group to address the challenging market outlook we anticipate” Thierry Pilenko, Chairman and CEO, commented.