Upstream results from some leading oil firms were the best seen for years, but others fell flat.

In terms of keeping shareholders happy, there’s nothing like announcing rising production levels days after Brent crude hits a three-year high—especially if you also float the idea of a possible dividend increase. That combination helped BP win perhaps the most plaudits after a recent round of first-quarter results from the oil majors.

When it announced its results on 1 May, BP was also able to report a significant increase in production as new fields came on stream. The company brought seven hydrocarbons projects on stream in 2017 and plans to bring six more—notably in Azerbaijan, Egypt and the North Sea—into operation in 2018. This activity was reflected in a 6% rise in first quarter production to 3.7m barrels a day.

This all helped push BP’s first quarter cash flow from operating activities to around $7bn, excluding payments relating to the 2010 Deepwater Horizon disaster in the Gulf of Mexico and some one-off charges—a level not seen at the company since 2014.

Brian Gilvary, BP’s chief financial officer, said the firm was considering increasing its dividend later in 2018, but that would depend on oil prices remaining at or above the current price, and a reduction in the company’s debt. BP’s debt stood at $40bn in the first quarter, largely because of the costs of settling litigation over Deepwater Horizon, the aftermath of which is now estimated to have cost the company more than $65bn.

European-based rivals also benefited from production increases driven by increased upstream investment, as the industry recovers from the lean years following the 2014 oil price crash. France’s Total increased production by 5% to some 2.7m barrels of oil equivalent a day in the first quarter, compared to a year earlier.

Norway’s Statoil increased cash from operations by 14% to $7.13bn in the first quarter, and while its net profit of $1.47bn was slightly below analysts’ expectations, it was still the highest since before the oil price crash in 2014.

Shell focuses on debt

A slightly different picture emerged at Shell, where net income of around $5.3bn was slightly higher than forecasts, but cashflow slipped slightly from a year earlier to $9.43bn despite a 2% increase in hydrocarbons production. The company attributed the lower cashflow to the impact of higher payments for oil price hedges and one-off tax payments.

Jessica Uhl, Shell’s chief financial officer, said the company would be focusing on reducing its debt—inflated by the purchase of BG in 2016—before addressing a planned $25bn share repurchase programme, which is due to take place by 2020.

Across the Atlantic, ExxonMobil and Chevron faced continuing problems with refining throughput, due to maintenance and upgrades. While total earnings from Exxon’s upstream business rose by more than 50% to $3.5bn, profits from its refining division fell 12% and those from chemicals fell 14%. The company is also still working on a revamp of its operations following the departure in early 2017 of former long-time chief executive, Rex Tillerson, who also became former US secretary of state when Donald Trump fired him in March.. Overall, profits rose 16% to $4.65bn, just below market forecasts.

At Chevron, earnings from refining and chemical activities slid 21%. The company, which has succeeded in increasing the size of its liquefied natural gas and US shale portfolios, still recorded quarterly earnings of $3.64bn, beating analysts’ predictions.

Price caution

The overall picture painted by these results is one of improving upstream revenues due to a combination of improved efficiencies put in train during the post oil price crash era, and the effects of a recovering oil price. It’s to be hoped that the efficiency improvements are here to stay in the oil sector—and with room for more. But no one can be certain about the oil price, which is the main driver behind both increased income and rising investment in fresh upstream projects.

That caution was evident in remarks by Harry Brekelmans, Shell’s project and technology director, who said deep-water projects still need to break even at $40/b or lower.

“It’s something we want to be very disciplined around because it gives you reassurance that going forward, your portfolio is resilient,” he told Bloomberg in early May. The company has said production at its 100,000 b/d Vito project in the Gulf of Mexico will now be carried out at less than $35/b, following a post oil price crash redesign that Shell said reduced the cost by 70%.

Few will be keen to take on projects with production costs much higher than that, regardless of the oil price recovery.