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Sagging crude output at the world's top oil companies is the latest indicator that their profits may have peaked even as oil runs toward US$100 ($127.29) a barrel.
Oil and gas production fell at all the largest publicly traded oil companies in the third quarter, as ageing oil fields, production-sharing agreements and soaring costs and demand for drilling services took their toll on output.
Profits at oil majors such as Exxon Mobil and BP have also flattened or dropped despite the record oil prices. And their lower output will only push up international prices further as demand from the US and emerging economies outpaces new supply.
"A lot of majors for years have been focused on returns and not about putting rigs to work," said Johnson Rice analyst Ken Carroll. "We're seeing the results." The big integrated oil companies reported third-quarter earnings that largely fell short of year-earlier levels due to much lower profits from petrol production.
Moreover, the companies' exploration and production businesses were not able to pick up the slack in the quarter, even with oil averaging about US$75 a barrel in the quarter.
Exxon, Royal Dutch Shell, BP, Chevron Corp, ENI and ConocoPhillips posted third-quarter output drops of between 2 per cent and 11 per cent.
"You would think that if oil went to US$110 a barrel that they would do incrementally better, but it's not necessarily so," Chris MacDonald of WHG Funds said of Exxon Mobil. "If they spend US$20 billion a year on capex and their production goes down, it doesn't say much for lesser companies." Oil majors have long complained that their access to oil projects around the world is shrinking, and higher crude prices have only exacerbated that trend.
Exxon, Chevron and ConocoPhillips all attributed parts of their production declines either to countries changing the terms of production agreements or to contracts that gave host countries a larger share of oil produced at the higher prices.
- Reuters
