The next round of oil-company earnings might show investors just how much firms still need to cut, even after executives stripped $126 billion from annual spending plans this year, a new report says.
Fuelfix.com reports that if Brent, the international crude standard, hangs around $60 a barrel for much longer, oil producers in the United States and elsewhere in the western world probably will have to cut deeper into investor dividends and share buyback programs. Some might also be forced to sell assets to fix damaged balance sheets, energy research firm Wood Mackenzie says in the report released Monday.
“Companies are facing a choice of paring back investment or maintaining momentum throughout the cycle, depending on their financial position,” Wood Mackenzie analyst Tom Ellacott says in a written statement.
The magic oil price that can keep most firms out of the red, according to Wood Mackenzie, has fallen $20 this year to $72 a barrel. As of 10 a.m., U.S. crude was just below $53 a barrel.
Dealmakers are skeptical of a surge in mergers for now, but the research firm says if oil stays cheap for a long time, buyers of oil assets might be able to start picking off some of the $300 billion inventory of property on the market later this year. That stockpile of assets represents 340 potential deals, the firm says.
