Oil price drop forces huge cut in new projects

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LONDON, Jul 31: Another major oil company has said it will cut billions of pounds from spending plans as the market adjusts to a second price slump – and more results on Friday are expected to detail further pain across the sector.
BG Group, the subject of a £55bn takeover by Shell that should complete early next year, posted earnings before tax and interest of $1.37bn (£880m) this morning, down by almost half on the $2.65bn (£1.7bn) it reported this time last year, according to the Financial Times.
Reuters notes this marginally beat analyst expectations as output surged by ten per cent, but it reflects the margin struggles the majors are facing amid a prolonged slump in the oil price. At midday Brent crude was down 1.3 per cent to around $52.60 a barrel, which will mark the lowest close for five months if it fails to recover this afternoon.
BG said it would reduce capital spending on new projects to between $6bn and $7bn next year, a cut of 30 per cent on last year.
It follows similar decisions by BP, Shell and Statoil and comes ahead of results from Exxon Mobil and Chevron, which Forbes says are also likely to reveal a major drop in earnings and reduction in spending.
Bloomberg video: 55ba88c9e4b046371921e70f Elsewhere, Spain’s Repsol announced its profits had also been hit by the fall in crude prices, with the Wall Street Journal reporting net profit in the second quarter dropped 44 per cent to €292m (£206m).

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