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Tuesday, May 24, 2022
HomeLatest NewsOil majors blamed for $40bn hit after leaving Russia

Oil majors blamed for $40bn hit after leaving Russia

The broad profits made by oil companies in the first months of 2022 have been overshadowed consequences of sanctions against Russia. Large Western companies supported the veto power over the Russian economy and decided to withdraw from their market, both in terms of sales and production. As a result, the blow to the largest companies in the industry is $40,170 million (nearly €38,000 million) in general, with the English BP in the lead. However, these losses were offset by high oil prices, which boosted their earnings in the first quarter and allowed them to maintain profits.

BP was by far the hardest hit by the exit from Russia and reported pre-tax expenses of $25.52 billion after the sale of its share in Rosneft and other businesses. In the Russian oil company, BP controlled almost 20% of the capital, which accounted for a third of BP’s oil and gas production in 2021, and its loss includes depreciation of $13,500 million. This charge pulled the company into losses in the first quarter of the year, after nearly a decade of record earnings in 2021 and even despite high commodity prices. BP’s operating profit beat analysts’ expectations, with revenue up more than 40% year-over-year.

BP’s losses stand out against the backdrop of positive dynamics of its competitors, which, despite the influence of Russia, increased profits compared to last year. French Total Energy It is the second country that has suffered the most because of its contact with Russia. In particular, he wrote $4.1 billion impairment due to the “uncertainty” of the implementation of the project for the production of liquefied natural gas (LNG), Arctic LNG 2located in the Russian Arctic and in which Russian Novatek. Total decided not to invest additional funds in the development of projects in Russia and began a gradual suspension of its activities in the country. Despite this, its sales through March were up 65% compared to 2021 and earned nearly $5,000 million (+48%).

For its part, Shell has warned that pulling out of Russia could cost between $4 billion and $5 billion. final influence has been reduced to 3,900 million as indicated in the results view. His influence in Russia is mainly due to his participation (27.5%) in a natural gas liquefaction project. Sakhalin-2 with Gazprom. However, through March, it increased its profits by almost 26%. In the case of Exxon Mobil, it turned out that the cost of its withdrawal from Russian activities amounted to $3.4 billion compared to a turnover of 90,500 million (+53%). Austrian OMV and Norwegian equinox they also posted losses of $2,170 million and $1,080 million, respectively, on their accounts.

Other companies in the sector did not record any impact on their accounts as they did not operate in Russia. However, the impact of the market is also reflected in the purchases they make in the country, which are not yet fully reduced. According to a report from Center for Energy and Clean Air Research (CREA)Russia has earned 63 billion euros from the sale of fossil fuels since it invaded Ukraine. Most (71%) were acquired in Europe and, among others, among those who received deliveries are the oil companies Exxon Mobil, Shell, Total, Repsol, BP or the Finnish Neste.

Despite exposure to the Russian market, not all of the consequences of the sanctions are negative for oil companies. Its profits have skyrocketed in recent months thanks to commodity prices, especially oil. The veto on Russian oil, already imposed by the US and the UK and being discussed in the European Union, is further restricting supply during a period of clear imbalances following a post-economic recovery demand recovery.

Russia is one of the main producers of oil, and its veto has led to a skyrocketing price. Price per barrel Brent set a record since 2014 in March, hitting $130 a barrel.. Despite declining since then, it is still trading above $110 and has gained 44% since January. A barrel of WTI, the benchmark in the US market, is also above $110.

Investors have not been left out of this trend, which is increasing the earnings of companies in this sector, and their prices have risen positively during the year, with up to 40% increase from January for Exxon or Chevron, against the backdrop of a sharp drop in the world’s major indices. Selective Euro STOXX Oil & Gas has gained 11.4% YtD, while Euro STOXX 50 has lost 15%.


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