BP and Shell Earnings Benefit From Cuts in Costs

BP and Royal Dutch Shell posted improvement in profits for the third quarter that surprised analysts, joining other large oil companies that showed more progress in their efforts of adapting to a world that has cheaper crude as the prices rebounded from lows at the beginning of the new year.

The oil industry has being going through tough times due to a slump in global oil prices the last two years, which had forced them to slash jobs and well as their spending while attempting to find ways to lower costs.

The scars due to the price drop remained evident in a number of companies’ earnings for the third quarter, but signs of companies adapting were also seen.

Shell was able to return to profit during the quarter, posting net income of $1.4 billion for the 2016 third quarter, after posting a $6.1 billion net loss for the same quarter one year ago.

At the same time, BP posted $1.7 billion in net earnings that was up from net earnings of $1.2 billion for the same period last year.

BP CFO Brian Gilvary said the oil company was continuing to make strong progress in its adaptation to the challenging margin and price environment.

The results of the two companies based in Europe were a positive sign in this mixed earnings season. Total SA the oil giant based in France said last week that its profit for the third quarter had nearly doubled from the same period last year to close to $2 billion. The company’s CEO Patrick Pouyanne cited deep cuts in costs for the increase in earnings.

Exxon Mobil and Chevron both based in the U.S. said last week that their profit had dropped during the just ended third quarter in comparison to last year during the same three-month period.

The majority of large oil companies have had to continue to work in bringing down costs in a price environment that continues to be uncertain.

Shell announced that next year it is expecting to spend over $15 billion in exploring and developing new gas and oil projects, which is the lower end of its spending ranged disclosed to investors this year.

BP announced it is planning over $1 billion less in 2016 for capital spending. It previously had forecasted $16 billion in capital spending, but now expects that will be $15 billion.

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