OIL and gas companies have managed to cut their costs by around 50 per cent in response to the crude price plunge since 2014 but may have damaged their growth prospects in the process, experts have warned.
A study by the Wood Mackenzie consultancy found big oil and gas companies have cut 2016 exploration and production spending by 49 per cent, or $230 billion, relative to 2014 levels.
The cuts will allow them to break even in cash terms at an average of around $50 per barrel this year.
"This is some achievement given the majority needed over US$90 a barrel in 2014," said Tom Ellacott, senior vice president of corporate research at Edinburgh-based Wood Mackenzie.
He noted a growing list of companies will be able to cover the costs of production and planned investments if the oil price falls below $40/bbl in 2016.
Brent crude traded at $44/bbl yesterday, compared with $115/bbl in June 2014.
However, Mr Ellacott noted that companies had relied heavily on cutting spending on exploration and new projects to rebuild profitability. He warned the cuts have damaged growth prospects.
The rate of growth in production among the 56 companies studied by Wood Mackenzie has slowed to a near standstill since 2014.
"Cost containment and capital discipline are still the strident messages emanating from all companies. But strategies will need to shift away from survival mode and look to the future," said Mr Ellacott.
The companies in the study have cut shareholder distributions by just $59bn since the oil price collapse.
Growth in total production among the firms has slowed to an annual rate of 1.4 per cent, from a peak of 3.4 per cent in 2014.
The study covered international oil and gas majors, state-owned oil firms and independents.
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