When it comes to the supermajors of the oil industry, Wood Mackenzie’s Chief Analyst and Chairman, Simon Flowers, says Chevron and Shell have the most resilient upstream portfolios at US$30 a barrel (bbl). Added to this, he said that the duo offers the highest cash margins at US$70/bbl and can deliver the biggest margin expansion— proving it is possible to be both resilient and leveraged to price.

The Chief Analyst in his most recent assessment noted that the portfolios for the two have a big weighting on deepwater projects and cash-generative Liqueified Natural Gas. He noted too that neither has much exposure to high-cost assets.

With respect to ExxonMobil, Flowers said that this oil company’s cash margins are at the low end of the Majors’ range at US$30/bbl, despite a growing weighting of deepwater assets in Guyana and other territories. “The problem is its exposure to high-cost, low-margin assets, principally oil sands but also other areas such as Alaska…,” the Chief Analyst said.

On the issue of how to build resilience, Flowers was keen to note that an active portfolio management can be a major game-changer. Further to this, he said that most of the majors have made progress rationalizing their upstream portfolios but he was keen to note that there is much more to be done. In this regard, the Wood Mac Chief Analyst said that high-cost, low-margin assets need to be divested.

“High carbon-intensity doesn’t affect resilience much today, but increasingly will. Assets with high carbon-intensity weaken emissions and ESG metrics so companies should look to reduce exposure to improve portfolio sustainability. ExxonMobil, in particular, has a great opportunity to boost upstream cash margins by selling its ‘awkward’ assets,” the Chairman concluded.


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