Oil groups slash costs, but investors spared

Oil titans are slashing costs and investments as a plunge in oil prices batters profits but there is still one area they dare not touch: dividend payouts to investors.

Crude oil prices have more than halved since mid-2014 in a global glut, squeezing the financial results at major oil groups and forcing them to rethink the viability of some of their costlier oil exploration plans.

British energy giant BP, ravaged by the 2010 Gulf of Mexico oil spill, said profit plunged 64 percent in the third quarter of this year. BP has axed its 2015 investment budget by $4 billion (3.6 billion euros) compared to last year.

"We are now in action to rebalance our financial framework in this new price environment," BP chief executive Bob Dudley said.

At Royal Dutch Shell, the pain was more intense as it took losses of $7.4 billion in the third quarter on huge write-downs after scrapping expensive projects in Alaska and Canada, vowing to become a "more focused and competitive company".

ExxonMobil, the world's biggest listed oil group, based in Irving, Texas, suffered a 47.5-percent plunge in net profit, insisting it has a relentless focus on business fundamentals such as costs "regardless of commodity prices".

Likewise France's Total, which reported a 69-percent fall in net profits for the same period and trimmed its investment budget for this year by 10 percent, or Italy's Eni which made a loss of 952 million euros and Norway's Statoil which reported losses of 299 million euros.

In an all-out battle to cut costs, however, dividend payouts to shareholders remain intact.

"The big oil companies are all slashing capital expenditure to enable breakeven operations at around $60 per barrel," said Jasper Lawler, analyst at European financial trading specialists CMC markets.

"The idea is that in the medium term oil prices will average $60 per barrel. This allows big oil to keep dividends intact by using low interest rates to run up debt levels in the short term," Lawler said.

Oil groups will do anything to avoid lowering payouts to their shareholders, said Alexandre Andlauer, analyst at French equity research group AlphaValue.

"They prefered to cut capital expenditure again by two or three billion rather than touch the dividend," Andlauer said. "The majors want to respond to market expectations, in this case investment funds," he said.

Oil companies have long strived to pay regular dividends to keep their shares attractive to investors through good times and bad.