Global oil prices have plunged by about half since last summer, when Brent crude, an international benchmark, fell from $115 a barrel in June 2014 to below $45 a barrel in January. On Thursday, Brent crude was trading at $65.84 a barrel, while U.S. crude oil hit a five-month high of $59.40 a barrel.

The drop in price of oil has seen it take a toll on the profits oil giants as reports for the first quarter in 2015, saw most of the oil majors reporting a drop in profit compared to the first quarter of the previous year.

One of the worst hit was Exxon Mobil Corporation which saw its earnings fall 46 percent in the first quarter as a drastic drop in oil prices continued to eat into the energy sector’s profits. The company last week reported quarterly profits of $4.9 billion, or $1.17 a share, compared with $9.1 billion, or $2.10, in the same period last year.

Revenues in the first quarter totalled $67.6 billion, a drop of about 36 percent from first-quarter revenues in 2014 ($106.3 billion).

Exxon Mobil continued to scale back capital and exploration expenditures as part of a multiyear plan to reduce raw material, service and construction costs. The world’s largest publicly traded oil company spent $7.7 billion in the first quarter, a 9 percent drop from a year earlier.

The company had earlier said that it has plans to cut its capital budget every year through 2017, with spending for 2015 reduced to $34billion, or 12percent less than 2014 spending.

Chevron Corporation was no exception to the drop in profit as the company at the weekend reported earnings of $2.6 billion for first quarter 2015, representing a drop of $1.9 billion from the $4.5 billion recorded in the first quarter of 2014.

According to the company’s financial results, foreign currency effects increased earnings in the 2015 quarter by $580 million, compared with a decrease of $79 million a year earlier.

Also sales and other operating revenues in first quarter 2015 were $32 billion, compared to $51 billion in the year-ago period.

The CEO, John Watson said last week while addressing stakeholders said that first quarter earnings declined from a year ago due to sharply lower oil prices, which reduced revenue and earnings in its upstream business. Downstream operations were strong, benefitting from lower feedstock costs and improved refinery reliability.

The Company said that they were responding to the current price environment by capturing cost reductions, pacing new project approvals and further streamlining their portfolio as planned. They are taking a number of deliberate actions to lower cost structure, and they expect these efforts to increasingly show through in the financial results as the year progressed.

The company listed its recent upstream milestones to include the introduction of fuel gas and start-up of the first gas turbine generator at the Gorgon LNG plant, installation of Wheatstone platform topsides and announcement of a natural gas discovery, Isosceles-1, in the Carnarvon Basin in 50 percent-owned Block WA-392-P, all in Australia and the achievement of first liquids from the Bibiyana Expansion Liquid Recovery Unit in Bangladesh.

Other milestones include the announcement of a joint venture to explore and appraise 24 jointly held offshore leases in the northwest portion of Keathley Canyon in the deep water Gulf of Mexico and the ramped up oil-equivalent production at Jack/St. Malo in the deepwater Gulf of Mexico to more than 70,000 barrels per day, both in the United States.



Royal Dutch Shell also saw its earnings for the first quarter fall by 56 percent compared with a year earlier, as improved performance in marketing and refining failed to offset the effects of the plunge in oil prices, said the company in its press release.

The Anglo-Dutch company’s profit, adjusted for inventory changes and one-time items, was USD3.2 billion, compared with USD7.3 billion in the same period a year earlier. Still, the results beat analysts’ consensus forecasts, and Shell’s shares rose about 1.5 percent in morning trading in London.

But analysts said that there was cause for concern in Shell’s results. In an indication of how quickly a drop in oil prices can erode margins, the company said that its earnings from finding and producing oil and gas were USD675 million for the quarter, compared with USD5.7 billion a year earlier.

Shell said that the price it received for oil in the first quarter was 52 percent lower than the same period in 2014, while the price of natural gas fell by 27 percent. The fall in prices directly cut USD4.7 billion from earnings.

The company confirmed that it would cut capital expenditure through the year till 2018, this development could be seen as the company suspended its $12billion Bonga deep water project in Nigeria which was supposed to be given an FID in December 2014. The company also plans to sell off more assets in the various countries it operates. So far in 2015, the company has sold off two assets (OML 29 and OML 18) for over $2billion in Nigeria.

BP, based in London, reported a drop in earnings of 20 percent. Adjustment for one-time items and inventory changes declined to $2.6 billion, compared with $3.2 billion in the first quarter of last year.

The drop was mostly a result of crude prices that averaged $54 a barrel in the first quarter of this year, compared with $108 a barrel in the period a year earlier. Profit at the company’s crucial exploration and production unit slumped to $600 million, compared with $4.4 billion a year earlier.

Partly compensating for that drop were refining and exploration earnings of $2.2 billion, compared with $1 billion a year earlier, and $449 million worth of tax credits, mainly in the United States and Britain.

BP took an additional $332 million provision for loss claims stemming from the deadly 2010 Deepwater Horizon oil spill in the Gulf of Mexico, bringing total charges to $43.8 billion.

Despite the lower earnings, BP also said it would hold its dividend steady at 10 cents a share.

BP is benefiting from the streamlining measures that Mr. Dudley was forced to put in effect to pay for damages from the Deepwater Horizon spill.

French oil giant, Total, also announced a 22percent fall in first quarter profits due to slumping oil prices and disruption of its activities because of violence in Yemen and Libya.

The company said in a statement that profits for the first three months of the year dropped to $2.6billion from $3.3billion during the same period last year, on 30% lower sales of $42.3billion.

The company also said that the profits slide amounted to 22 percent in adjusted terms compared to the first quarter of 2014. But it said that erosion was partially offset by a 10percent hike in production to 2.4million barrels per day, and capital gains realised on asset sales.

The numbers were largely in sync with the first quarter figures revealed by British rival BP Tuesday which said its profits had dipped 26% to 2.6billion.

The CEO Patrick Pouyanne cited the positive impact of total’s push to cut $1.2billion in operating costs, and profits made on $5billion in assets Total has already sold out of a total of $10billion it has decided to shed.

The Nigerian Stage

The outlook has remained gloom in the oil sector and Nigeria is not isolated from the mix. This has already reared its head in the country’s poorly managed oil and gas sectors with reduced local spending and suspended FIDs on yet to be commissioned deepwater projects.

The oil service companies are hit by the woes in the oil sector as quite a lot of them have had several contracts delayed or cancelled thereby causing them to run on deficits and very lean budgets. As of today, two of the major oil service companies in the country, Haliburton and Baker Hughes have had to cut staff strength globally and their Nigerian operations accounted for a good number of the staff cut. Some other service companies have had cause to cut its staff strength with some other companies preferring to adopt a wage reduction principle.

Local contractors are already hard hit as all the oil majors have listed a reduction in one-off disposable items, construction costs as well as other sundry costs spending. This would affect the local economy and the real sector that had recently been boosted by the growth of the country’s oil and gas sector in its era of prosperity.

It remains to be seen what the outlook would be for the rest of the year with new developments like the Iran Peace Deal negotiations which market analysts and experts predict would cause a further crash in prices, but one certain thing is that the oil majors have all put in place measures to help them check the trend of falling prices.

Credits http://go.engineer-ng.net/profiles/blogs/global-oil-market-the-giants-struggle-in-q1-2015