Big Oil keeps brakes on spending even with crude rally windfall

Big Oil keeps brakes on spending even with crude rally windfall
US shale producers have promised investors they will keep a tight rein on spending in 2021. (AP)
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Updated 12 July 2021

Big Oil keeps brakes on spending even with crude rally windfall

Big Oil keeps brakes on spending even with crude rally windfall
  • Benchmark crude oil prices more than doubled in the second quarter of 2021 from a year earlier and have risen further in recent weeks to close to $78 a barrel

LONDON: Leading international energy companies are resisting the temptation to rush and spend an unexpected windfall from rallying oil and natural gas prices as they focus on longer-term energy transition challenges, executives and analysts said.
Benchmark crude oil prices more than doubled in the second quarter of 2021 from a year earlier and have risen further in recent weeks to close to $78 a barrel, their highest in almost three years as OPEC and other major producers failed to strike an agreement to lift output.
That, along with higher global natural gas prices because of supply issues, will boost the coffers of oil companies after firms like Exxon Mobil, Royal Dutch Shell and BP sharply cut costs in the wake of the coronavirus pandemic last year.
“The cash flow for majors is looking very strong, they’re certainly firing on the oil and natural gas cylinders,” Redburn analyst Stuart Joyner said, adding that things could improve further once demand for refined products fully recovers.
The companies are expected to provide updates on their spending plans in second quarter earnings reports over coming weeks, but are unlikely to significantly shift tack with investors laser-focused on securing higher returns from the sector after a disappointing decade.
While the heads of top energy companies said last month $100-a-barrel oil was achievable again in coming years, they added prices would be volatile, meaning there is little incentive, at least for now, to commit billions to projects that could take a decade or more to show a return on investment.
Also dampening the bullish mood is huge uncertainty over near-term energy demand due to the resurgence of COVID-19 in parts of the world and longer-term with the shift to lower carbon fuels to fight climate change.
“The international oil companies are still rebuilding their balance sheets,” Brian Gilvary, CEO of INEOS’ oil and gas division INEOS Energy and a former BP chief financial officer told Reuters.
Shell said last week it will increase returns to shareholders earlier than expected thanks to higher revenue, holding its annual capital expenditure at no more than $22 billion.
For companies such as BP and Shell, France’s TotalEnergies and Spain’s Repsol, the coronavirus crisis has already accelerated the roll-out of new strategies aimed at lowering carbon emissions and growing renewables businesses.
So, unlike previous cycles when rising oil prices loosened purse strings, executives will likely stick to their spending discipline and focus on their energy transition strategies.
“Higher oil prices allow us to extract more value from our existing businesses, which in turn will generate more resources for our spending on transformation in line with our energy transition roadmap,” Repsol Chief Executive Josu Jon Imaz told Reuters in a statement.
BP will stick to its plan to reduce oil output by 40 percent, or roughly 1 million barrels per day, by 2030, including through the sale of oil and gas assets, CEO Bernard Looney said at the Reuters Energy Transition conference last month.
“Strong oil prices are very positive for our strategy,” Looney said. “Those assets that we sell, will be selling in a much higher price environment, potentially, and therefore will generate more proceeds.”
A commodity price rally in the late 2000s drove oil prices to record highs above $140 a barrel and sparked a wave of investments including in huge, complex deepwater oilfields, giant gas liquefaction plants and a US shale drilling boom that upended oil supplies.
Capital spending by the majors is likely to edge up from next year as companies pay down debt and fully recover from the pandemic, Redburn’s Joyner said.
“There will be more capex, but not much of the increase will go into upstream (oil and gas production), it’s going to go into renewables.”
US shale producers have also promised investors they will keep a tight rein on spending in 2021.
In contrast, smaller international oil and gas drillers are expected to slowly ramp up spending in response to the higher prices, INEOS Energy’s Gilvary said.
“Smaller exploration and production companies will increase spending but in a more measured way because they tend to be more focused on the short- to medium-term.”


Aramco CEO says energy transition not going smoothly: Reuters

Aramco CEO says energy transition not going smoothly: Reuters
Updated 27 January 2022

Aramco CEO says energy transition not going smoothly: Reuters

Aramco CEO says energy transition not going smoothly: Reuters

BEIRUT: Saudi Aramco CEO Amin Nasser said on Thursday that the energy transition “was not going smoothly,” pointing to a resurgence in demand for oil and gas as the global economy recovers while supplies lag on the back of falling investment, according to Reuters.

“We all agree that to move towards a sustainable energy future a smooth energy transition is absolutely essential but we must also consider the complexities and challenges to get there,” he told the B20 conference in Indonesia via video link.

“We have to acknowledge that the current transition is not going smoothly,” he said.

- Reuters


SNB board recommends dividends of over $1bn for the second half of 2021

SNB board recommends dividends of over $1bn for the second half of 2021
Updated 27 January 2022

SNB board recommends dividends of over $1bn for the second half of 2021

SNB board recommends dividends of over $1bn for the second half of 2021

RIYADH: Saudi National Bank, the Kingdom’s biggest lender, said its board has recommended cash dividends of SR4.03 billion ($1.1 billion), or 9 percent of capital, for the second half of 2021.

SNB’s shareholders will receive SR0.9 per share, with a total amount of 4.48 billion shares eligible for dividends, a bourse statement by the bank revealed.

This brings the annual dividend yield to 2.12 percent, based on a share price of SR73, given the bank paid out SR0.65 per share for the first half of the same year.

The distribution date is yet to be disclosed, according to the statement.


Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP

Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP
Updated 27 January 2022

Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP

Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP

RIYADH: The majority of Saudi businesses gather data faster than it can be analyzed and used, Dell Technologies has warned ahead of the LEAP tech event being held in Riyadh from Feb. 1-3.

The US firm is set to take part in the forum, which is focused on future and disruptive technologies.

Ahead of the event, Mohamed Talaat, vice president in Saudi Arabia, Egypt and Levant at Dell Technologies, pointed to research by his company in 2021 that showed 70 percent of Saudi respondents have data-driven business and consider data as the lifeblood of their organisation.

However, 59 percent said they were gathering data faster than they could analyze and use.

Talaat said: “Saudi Arabia today stands at the threshold of change, underpinned by the nation’s ambitious vision and drive to transform, innovate and build a legacy for generations to come.

“Dell Technologies remains committed to advancing the country’s transformation agenda. We're empowering local organizations with end-to-end infrastructure and client solutions. They not only support a data-driven work culture, but are also capable of predicting the future and achieving better business results.”


Pandemic fast food orders see Saudi chain Herfy triple profits in 2021

Pandemic fast food orders see Saudi chain Herfy triple profits in 2021
Updated 27 January 2022

Pandemic fast food orders see Saudi chain Herfy triple profits in 2021

Pandemic fast food orders see Saudi chain Herfy triple profits in 2021

RIYADH: Saudi Arabia’s largest food chain, Herfy Food Service Co. has seen over a threefold rise in its estimated annual profit for 2021, after a surge in its sales during the pandemic.

The estimated net profit amounted to SR162 million ($43.2 million), compared to SR52.8 million a year earlier, according to a bourse filing.

The hike was propelled by a jump in sales of 22 percent, reaching more than SR1.3 billion, as well as a fall in general and administrative expenses.

This came despite a decrease in other income and higher selling and marketing expenses, the Riyadh-based food chain owner said in a bourse statement.

Herfy Food Services was established in 1981, and the first Herfy restaurant opened in Riyadh that same year.


Shares in SoftBank trading at their lowest level since May 2020

Shares in SoftBank trading at their lowest level since May 2020
Updated 27 January 2022

Shares in SoftBank trading at their lowest level since May 2020

Shares in SoftBank trading at their lowest level since May 2020

RIYADH: Japan's SoftBank, backed by the Saudi Public Investment Fund was among the most significant victims of the tech stock sell-off across Asia on Thursday, Bloomberg reported.

Investors turned on billionaire Masayoshi Son's company as the tightening phase of central bank policies unfolded.

The stock dropped as much as 9.8 percent in Tokyo, the most since March 2020, as Nasdaq futures tumbled and shares of the firm’s biggest investment, Alibaba Group, dropped in Hong Kong.

Hawkish signals from Federal Reserve Chair Jerome Powell led investors to bet against technology companies, which have powered much of the recent growth in global markets: something SoftBank has been gambling on with its Vision Funds of speculative tech bets.

“SoftBank is a poster child of a firm highly leveraged to the current asset bubbles,” wrote Amir Anvarzadeh, senior strategist at Asymmetric Advisors Pte, who recommends shorting the stock.

“This latest lurch down in its value could add further pressure on its financing structure.”

Shares in SoftBank traded at their lowest level since May 2020, with reports that a planned sale of its Arm chip unit to Nvidia was likely to fall through also weighing on the stock.

Analysts pointed out that the failure of the deal may lead to a credit downgrade.