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Fitch reveals breakeven Brent price for European oil majors

Oil&Gas Materials 16 February 2017 14:21 (UTC +04:00)
Major European oil companies need Brent prices of $50-$60 a barrel for cash flow to break even in 2017.
Fitch reveals breakeven Brent price for European oil majors

Baku, Azerbaijan, Feb.16

By Leman Zeynalova – Trend:

Major European oil companies need Brent prices of $50-$60 a barrel for cash flow to break even in 2017, according to Fitch Ratings' analysis.

Royal Dutch Shell, Total and BP should all be able to cover their capital expenditures (capex) and cash dividends from operational cash flows if oil averages $50-$60 per barrel in 2017, according to the preliminary modeling of Fitch.

“Depending on actual prices, major oil companies may continue to report negative organic free cash flows in 2017, but a combination of operating expenses (opex) savings, capex cuts and scrip dividends puts them in a safer position,” said the analysis.

The actions taken by European majors should be enough provided the recent oil recovery does not prove short-lived, Fitch Ratings’ analysts believe.

“ConocoPhillips, which unlike European majors has no downstream operations to support its cash flows, has a break-even price below $50 per barrel,” said the analysis. “This lower break-even is the product of efficiency gains and cost re-sets, as well as the fact the company has paid for some of its larger mega-projects and is now at a point in the cycle which requires less capex.”


Fitch Ratings believes that 2016 represented the lowest point of the cycle, and oil companies' results should gradually improve on stronger oil prices, cost deflation and better spending discipline.

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