Oil majors are not so slick — but maybe a long-term buy

As BP proved today, the current set of quarterly results from the oil majors are going to be among the worst in living memory.

That’s not totally surprising, given they have had to deal with a crude oil price that has fallen by 70% since the middle of 2014. Brent crude was an average of £35.20 a barrel in the first quarter, down some 36% on a year earlier. BP and Shell have both announced massive cuts in their workforce, and the latter may have to go even further to justify its takeover of BG if oil prices do not perk up.

In fact, they have done just that recently, with Brent hovering between $40 and $45 a barrel so far this month. That is not high enough to make the oil majors vastly profitable but it is sufficient for them to achieve a reasonable margin, and most watchers think the likeliest direction for the oil price is still up rather than down.

That is something the respective boards of directors will have to hang on to when they come to making that all important decision on dividends. Shell will certainly want to maintain its payout in the wake of the BG deal to reward loyal shareholders.

BP has struck a more cautious note, suggesting that — while it too would like to maintain its dividend, as it has today — it may not do so for ever if the oil price remains low. It’s a gamble but buying big oil shares now could prove a very smart move in the long term.