BP BP Plc

By Sarah Kent 

LONDON--The price of oil hit a 13-year low during the first three months of 2016. But early financial results show that some of Europe's biggest energy companies performed better last quarter than they have in months.

BP PLC said earlier this week its net loss shrunk nearly 80% from the prior quarter. On Wednesday France's Total SA and Norway's Statoil ASA said they were back in the black last quarter after suffering losses in the last three months of 2015. And while Italian oil giant Eni SpA said Friday it had racked up a nearly billion-dollar loss for the quarter, its share price remained flat in early trading since the loss wasn't as bad as many investors predicted.

The results reflect aggressive cost cuts the companies have made to cope with a nearly two-year slump in crude prices. It isn't yet clear if U.S. rivals have made similar progress-- Exxon Mobil Corp. and Chevron Corp. report earnings later on Friday. Analysts forecast Exxon will report the lowest quarterly profit since it bought Mobil in 1999. Chevron is expected to report a second-consecutive quarterly loss for the first time in a quarter-century. ConocoPhillips this week reported a $1.47 billion loss for the quarter after making a profit a year earlier.

Beyond individual companies' performance, there has been widespread optimism in market recently, as oil prices have jumped 22% since the beginning of April.

In the U.S., the extreme belt tightening by oil companies is finally leading to declines in crude output that could help rebalance the global market. Federal figures show U.S. oil production fell below 9 million barrels a day a few weeks ago, after peaking at 9.7 million in April 2015.

"Industry spending could be set to decline to levels not seen since 2007," analysts at Citi Research said Monday, adding that additional cuts "should be sufficient to deliver the necessary declines in global production, with balance appearing within reach in the second half of 2016."

By any measure, the first quarter of 2016 was a bad one for oil companies. For the most part, their profits were sharply lower compared with a year earlier, and they spent more cash than they brought in. But the European companies' earnings represented an improvement over more recent results, to the surprise of investors and analysts such as Bernstein Research, which last week said the beginning of 2016 would be "the zero earnings quarter."

Instead, big cost cuts in areas like staffing levels and exploration budgets since 2014 helped the companies generate results that were an improvement on the past quarter. Combined with a recent uptick in oil prices, that has helped boost the companies' share prices in recent days.

BP's shares rose more than 4% Tuesday after it announced its first-quarter results. Statoil's share price also shot up over 4% Wednesday, while Total traded 2% higher. That was due partially to low expectations among investors.

"This industry has overpromised and under-delivered for a decade so it isn't surprising when executives said 'we can cut costs,' there was some skepticism," said Chris Wheaton, a portfolio manager at Allianz Global Investors "But actually they are delivering ahead of their own expectations."

BP said Tuesday its costs over the last 12 months were $4.6 billion lower than in 2014, and earlier this year announced plans to cut 7,000 jobs. Total said it is on track to hit its targeted $900 million of savings this year and has managed to squeeze production costs while increasing output. Statoil bolstered its first quarter by reversing $308 million-worth of impairments after driving down project costs.

"These businesses have been in the past run along fairly flabby lines in terms of cost control," said Richard Hulf, a manager at Artemis Investment Management's global energy fund. "This oil price has caused people to take another look at operations so I think we're seeing for the first time what a properly managed oil business looks like."

That kind of optimism may not extend to U.S. shale producers, typically smaller companies grappling with high debt. At a conference Wednesday, Scott Sheffield, the chief executive of U.S. producer Pioneer Natural Resources Co.--which reported a $267 million first-quarter loss--warned that "there's more debt in this downturn than I've ever seen." That may force companies to make big payments before ramping up production even if the oil price goes up.

Erin Ailworth

,

Bradley Olson

and

Alison Sider

contributed to this article.

(END) Dow Jones Newswires

April 29, 2016 08:25 ET (12:25 GMT)

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