Shareholder value looks to be main guide as major oil companies reset their goals after two years of upheaval
As oil companies reap unprecedented profits from the recent highs in oil price, Andrew McBarnet takes at look what oil industry leaders are saying in public about the future of their business. Competitive they may be, but there is a remarkable unanimity among the major oil companies about their view of the business which they dominate and the world in which they operate. At the moment companies are basking in the glow of financial results which can only be described as a spectacular rebound from the oil price and restructuring turbulence of 1998-99, but the company chairmen confess there is a lot of work ahead to satisfy 'shareholder value', the touchstone of all undertakings. First, those results. ExxonMobil, the biggest of them all, reported first quarter earnings for 2000 of $3350 million excluding the merger expenses and gains on regulatory divestitures, an improvement of 108%. Net income of $3480 million was a quarterly record and improvement of 135% from the equivalent period the period before. The story at the other supermajors Shell and BP Amoco was much the same. The Shell Groupís adjusted earnings were an all time record of $3129 million, double the previous year, and reported net income for the quarter at $3335 million was also record. BP Amoco registered a first quarter replacement cost profit before exceptional items of $2707 million, which was a record increase over the first quarter of 1999 of a staggering 256%. Looking just a little down the food chain, much the same success has been achieved. Chevron reported a first quarter net income of $1044 million, more than three times the equivalent figure in 1999 and the record operating earnings of $1106 million were nearly four times last yearís figure. Texaco's normalized earnings for the first quarter were $602 million, the highest quarter since 1981. Earnings at aspiring supermajor TotalFinaElf are harder to decipher and compare, because consolidation has been so recent, but the group's first quarter report suggests a 71.6% increase in consolidated sales over the same period last year. All these major conglomerations recognize that their exceptional performances have been facilitated mainly by the extraordinary turnaround in the price of oil. Brent crude was ticking along nicely at $19 per barrel in early 1997 before dropping, at one point to less than $10 per barrel last year. Earlier this year Brent had vaulted to over $30 per barrel for a short period. A clear concern for industry leaders is whether the volatility of the past two years will continue. The consensus seems to be that we are in for a period of greater stability although, given that the price lows of 1998/99 were not predicted by the majors, this may not be totally reassuring.