The oil and gas industry has splurged £10bn over the past 12 months in an attempt to protect dividends, according to new research from trading house Banc De Binary.
The value of cash and assets held by oil and gas companies listed on the London Stock Exchange has plummeted from £151.8bn this time last year to £141.5bn, as businesses continue to plunder reserves in the face of falling prices.
The rout in the oil price has seen a barrel of Brent crude fall from over $110 to just over $30 in as little as 18 months, with analysts and industry leaders divided over whether the price will recover in the near future. According to the research the pace of spending is increasing, with £4.9bn spent in the previous year.
“Oil & gas companies are doing all they can not to cut dividends and that includes spending their cash pile and selling off easily liquidated assets like their petroleum stocks,” Banc De Binary founder, Oren Laurent, said. “If oil prices remain as low as they are, something has to give and many analysts are predicting substantial cuts in dividends.”
The price fall has been sparked by a global supply glut, with Opec refusing to put a ceiling on production without the cooperation of the US and Russia.
Meanwhile, firms in the sector are being warned they must invest in low carbon energy as the pace of change in the industry accelerates.
According to PwC’s New Energy Futures report, the immediate price and oversupply issues in the oil and gas market shouldn’t obscure the need to look beyond the existing system.