The crisis did not manage to have a dramatic effect on the operating performance of oil majors in Q1 2020.
A number of companies showed a decline of production in Q1 2020 versus Q4 2019; however, there have been increases in oil production for some of the majors. Refining volumes have demonstrated certain insignificant declines. However, wholesale and retail sales of oil products have experienced significant declines of up to 20 percent, specifically caused by sales reduction in the European markets that shut down for quarantine.
Given the average oil price reduction of 20 percent in the Q12020 versus Q42019, revenues of oil majors showed a decline of up to 30 percent. In addition to declines in revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA) was adversely affected by write-downs of inventories to current market values.
Q1 2020 EBITDA was down as much as 80 percent in comparison to Q4 2019. Most companies still managed to demonstrate positive operating cash flows despite posting negative bottom line.
The following themes seem to be pervasive across the oil industry:
In response to market conditions in Q1 2020, oil majors announced a number of anticrisis measures:
International oil majors demonstrated their ability to adjust to a significant fall in market prices due to strong balance sheets and focus on cost-effective projects. Oil majors overall were optimistic about return of oil prices to the pre-COVID-19 levels within a one- to two-year horizon.
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