Crude's low price hits oil company

A CLOUD of gloom descended on the oil sector yesterday as Enterprise Oil - a pure exploration and production stock, and one of the industry's strongest players - revealed a collapse in profits, and then went on to say that the industry was facing "the toughest time in its history".

Shares in Enterprise Oil plunged by 10 per cent yesterday to 332p, nearly half their level in May, as it warned that it was being forced to consider a dividend cut.

Net profit, after exceptionals, fell from pounds 80m to pounds 12m.

In a letter to shareholders, Sir Graham Hearne, the chairman, said: "I write to you at a time when the oil industry is facing arguably the toughest time in its history.

"Oil prices over the past year have fallen to their lowest level for 25 years in real terms.

"As a result, I have to report a disappointing set of results," he continued.

Sir Graham said the profits were "clearly not acceptable", and he added that the oil industry must discover its own solution "from within, not from without".

The company outlined unprecedented measures to cut costs in every area of its business - from exploration to office space.

Pierre Jungels, the Belgian chief executive, said: "We cannot bank on higher oil prices in the foreseeable future, so we are intent on driving Enterprise Oil even harder.

"A widespread review of our business in a world of low oil prices has identified a number of actions we will be taking in order to create growth, even if crude prices stay below $15 a barrel for several years."

Actions to be taken by Enterprise will include cutting down on exploration for new oil fields - even though it is reckoned to be one of the best exploration plays in town, with an unrivalled record of actually finding oil.

It may also start cutting its stake in associated companies; renegotiating costs, and even letting out excess office space.

In many of the company's projects, cost levels were set at a time when oil prices were much higher.

Liz Butler, an oil analyst at Panmure Gordon, said: "The low oil price is killing them and it is killing every oil company. Enterprise is in a better position that most.

"In real terms, the oil price is probably at its lowest since 1973."

Enterprise realised an oil price of pounds 8.15 ($13.42) a barrel in the first half of 1998, compared with pounds 12.11 ($19.78) last year. Despite cutting its costs from pounds 6.12 to pounds 5.83 per barrel, the impact of this fall has been devastating.

World oil prices have been slashed as Iraq has in effect re-entered the market and the economic slump in Asia has reduced demand. Mild winters in Western Europe and the US and an excess of stock have aggravated the problem.

Mr Jungels said the industry needed a co-ordinated action plan to tackle the cost of getting oil and gas out of the ground, including running wells in common with other companies and bundling assets together.

Internal cost-cutting was essential, including slashing travel, entertainment and commu- nications budgets. But the "real prize" - a cut in costs of 10 per cent - could only be achieved by action across the industry.

Outlook, page 15

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own