Major oil and gas producers reported healthy profit and cash flow in Q2, with several posting the most robust gains since the oil market downturn began in 2014. Exxon Mobil nearly doubled its profit compared to a year ago, based on a strategy to cut production costs and complete projects that can produce profits within a few years rather than a decade.
While cutting expenses improved financial performance, big oil companies are expected to grow largely from short-term projects such as fracking, which in turn will bring quicker revenue. Chevron reported that its land in West Texas, the hottest spot for drilling in the world, can bring a 30% return, including overhead. Shell mentioned that it’s preparing to diversify its product portfolio by moving into renewables and natural gas. It now produces more gas than oil.
Cutting production expenses and employing better technology to increase cash flow is always a noteworthy strategy. However, will supply and demand be there downstream where consumers also determine big oil’s potential profit? It appears oil and gas producers think so, and several believe that falling demand will not be a threat before 2040. In the meantime, the majors are learning how to deal with low oil prices, which have been hovering around the $49 mark. As they see it the days of $100 a barrel may never come back.