Coronavirus: why oil companies are scrambling to survive

  • Date: 14-Jul-2020
  • Source: Financial Times
  • Sector:Oil & Gas
  • Country:Saudi Arabia
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Coronavirus: why oil companies are scrambling to survive

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Going into the coronavirus crisis, major oil and gas companies, such as Royal Dutch Shell and BP, had promised their investors they could do it all. They pledged to hand more cash back to shareholders, pay down debt, keep generating even higher profits from their hydrocarbon businesses, while also beginning to invest in cleaner forms of energy. Now they've been pushed into cash conservation mode. Crude prices fell below $20 a barrel in April as huge amounts of oil supply coincided with a severe drop in demand. As governments imposed lockdowns and travel bans to contain the spread of the virus, oil consumption collapsed by as much as a third.

Even as prices recover back above $40 a barrel, oil companies are preparing for more uncertainty. Shell cut its dividend for the first time since the Second World War, while BP has announced it will sack 10,000 people as it accelerates a corporate restructuring under a new chief executive. It is sinking in that the pandemic's impact will endure. From the coronavirus hit to the airline industry and demand for jet fuel to persistent weakness in the broader global economy, Shell