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Charting the Future of the Largest Oil Companies

Bio
Author

Keaton Horner, E.I.T., Associate

Author Biography

Keaton graduated from the University of Alberta with honours with a degree in petroleum engineering. He completed internships at Canadian Natural Resources and Nexen before joining RSEG in 2019. A member of the Macro Intelligence team, Keaton focuses on trends affecting E&Ps and contributes to Hardcore, an ongoing series that analyzes the oil and gas industry using the latest drilling and economic data.

Very large energy firms such as Exxon Mobil and Chevron are usually resilient to volatile commodity price cycles compared to their smaller rivals, but the so-called supermajors are far from immune to the impacts of the COVID-19 pandemic. Their struggles began long before the pandemic and include a weak LNG market, low refinery margins, difficulty investing within cash flow and increasing investor pressure on environmental, social and governance issues. COVID-19 acts as an accelerant for these pressures and forces the supermajors to re-evaluate their long-term strategies

The supermajors must make capital allocation decisions from a wide spectrum of future projects, including upstream (production), downstream (refining and marketing) and renewable energy investments. To understand the strategic compass for each supermajor, the economics of the upcoming slate of projects must be assessed. Figure 1 shows a dispatch curve – the breakeven price and cumulative resource recovery – for the 50 most prominent upcoming oil projects across the portfolio of the six largest supermajors. The average breakeven at sanction date represents the required oil price for continued investment in the sector at the projects start date.

FIGURE 1 | Oil Project Dispatch Curve

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