Recovering oil prices since the end of 2016, and steep cost cuts since the oil price crash started almost three years ago, have coalesced to lessen the need of the world’s five largest oil companies (ExxonMobil, Total, Chevron, BP and Shell) to borrow. Since 2014, the five supermajors have more than doubled their combined net debt to $220 billion, but this may be as bad as it gets, according to a Bloomberg report late last week. According to Jeffries International analysts cited by the news agency, at $50/bbl, the companies can pay dividends and balance their books without borrowing for the first time in five years.
Jeffries estimates that the five supermajors generated a total $180 billion in cash from operations in 2014. In 2016, that fell to $83 billion. Bloomberg reports the brokerage as saying that higher oil prices and cost cuts will drive this up to $142 billion this year and $176 billion in 2018.
During the downturn, oil producers borrowed to maintain dividends, according to the report. In Shell’s case, debt was increased by its $54 billion acquisition of BG Group. Fitch Ratings estimates that France’s Total will have a $1 billion cash surplus after dividend payments if oil prices stay around $55/bbl, versus a $3.6 billion deficit at $45/bbl. Meanwhile, Shell’s shortfall would be $823 million at $55/bbl, versus $75 billion at $45/bbl, Bloomberg cited Fitch as saying.