Chevron and BG hit by oil’s price plunge

THE oil price rout found new victims on both sides of the Atlantic yesterday as BG Group and Chevron revealed profits had tanked.

BG, which is in the process of being sold to Royal Dutch Shell, reported a 65pc fall in second quarter profit to £275.5m, while Chevron’s fell 90pc.

The oil price has crashed by around 50pc since last summer as the shale oil boom in the US, which turned it into the world’s largest fuel exporter, pushed global production higher.

At the same time, the Opec oil cartel of the Middle East did not reduce its supply, resulting in a glut. Fears that Iran could flood the world with its oil stores after the lifting of sanctions next year has also kept the price low, at around $52.8 a barrel yesterday, down from $110 in June last year.

BG’s first-half revenues fell 25pc to £5bn but its update was better than the City expected while production rose by nearly a fifth.

It confirmed a 9.22p a share interim dividend, which helped BG’s shares rise 13p to 1092.5p.

Chief executive Helge Lund said: ‘We attacked the cost and efficiencies basis very early. Capital expenditure is 41pc lower than the same quarter a year ago.’

The group aims to make nearly £200m in savings in 2015, and the £47bn takeover by Shell is on track to complete in 2016. Lund said firms must have business models that work at low oil prices.

US oil producer Chevron, which has also been cutting costs, missed analyst expectations and reported its worst profit in nearly 13 years. Net profit fell 90pc to £366.7m.

Chevron chief executive John Watson said the results were weak and added: ‘Multiple efforts to improve future earnings and cash flows are under way.’

Chevron was saved from a loss by its downstream business – the refining and petrol arm – benefiting from lower oil prices, and profits quadrupled to £1.9bn.