R ES E A R C H & A N A LYS I S
OPERATING UNDER COVID-19: IOCS’ COST EFFICIENCY STRATEGIES BY AMINA HUSSEIN, REHAM GAMAL, AND TASNEEM MADI
Eni's Expenditure Cuts
The spread of the COVID-19 pandemic crippled global oil demand and led many petroleum companies to suffer significant losses. Accordingly, they were forced Capex to slash spending and cancel projects. As per a press release by Rystad Energy published in April, before the outbreak, the expected total revenues of exploration Value (EUR billion) % of planned Capex and production (E&P) companies were $2.35 trillion in 2020 and $2.52 trillion in 2021. Post the outbreak, the revenues are expected to fall to $1.47 trillion in 2020, 30-25 and to $1.79 trillion in 2021. Consequently, the companies cut their spending by an 25 average of 20% in early 2020. The spending is expected to further fall by 25%, from $530 billion in 2019 to $410 billion in 2020, with most of the projects being delayed. In this regard, this report reflects the status of international oil companies (IOCs) in 2 Q1 2020 and identifies their strategies to efficiently reduce their costs and minimize exposure to losses during the outbreak. The report embraces 13 IOCs which clearly 2020 identify their position and plans.
1. ENI
2-3.5
Y
2021
Opex
In Q1 2020, the Italian company Eni recorded a net loss of EUR 2.93 billion as opposed to a net profit of EUR 1.1 billion in the same period of 2019. The E&P adjustedoperating profitparticularly decreasedby 55% on an annualbasis, reaching EUR 1.04 billion, mainly driven by a deteriorated trading environment and lower production volumes. Eni has instantly responded to the outbreak by revising the industrial plan for 2020 and 2021 to keep a solid balance sheet and lower costs, according to Eni’s Q1 2020 results report.
EUR 400 million
BP’s Capex ($ billion) (YoY)
The company’s report showed that Eni implemented widespread initiatives to save about EUR 600 million of expenses in 2020. Furthermore, with capital expenditure (Capex) revisions focused on the E&P segment, Eni’s production level in 2020 is 5.6 expected to decline to 1.75-1.8 million barrels of oil equivalent per day (mmboe/d), a drop of 4-6% from 2019.
2. BP
3.8
32% Q
2019 2020 In April, the UK giant BP announced spending cuts plans to combat COVID-19 effects on their financial status. The outbreak caused BP to lose $628 in Q1 its financial health, spending was announced to record $ Formillion BP to protect 2020, compared to a $2 billion profit in Q1 2019, according to the company’s Q1less than planned. This will include a $1 billion cut in spendin 2020, a 20% 2020 results report. shale projects, which coincided with the major decline in West Texas Interm (WTI) crude price, when it recorded a historical level of $-37 per barrel on
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