Europe’s major oil and gas companies have turned a corner after a three-year slump, reporting strong growth in profits and vowing to press on with saving more money amid a fragile recovery in oil prices.
Royal Dutch Shell rds-a , France’s Total tot and Norway’s Statoil sto reported sharp increases in cash flow from operations in the second quarter as profits beat analyst expectations, meaning they can all comfortably pay dividends and reduce debt.
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Shell led the charge, more than tripling profits in the second quarter from a year ago, boosted by its refining and chemicals business and a 16 percent rise in oil prices.
“This demonstrates they have moved themselves to a new level of profitability at $50 oil,” said Colin Smith, director of oil and gas research at Panmure Gordon.
Combined, the three companies more than doubled cash flow from operations to more than $41 billion from about $17 billion. Shell‘s first-half cash generation rose seven-fold, a year after it completed the $54 billion acquisition of BG Group.
Oil investor hopes were raised at the start of the year by a deal to cut production between members of the Organization of Petroleum Exporting Countries and some non-OPEC producers. That lifted oil prices above $58 a barrel in January, well above their 2016 low of just $27.
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But Brent crude prices slipped back below $50 in the second quarter as U.S. shale production surged, sparking a wave of price forecast downgrades from banks and prompting investors to focus again on cost cutting by oil companies.
Statoil’s Chief Financial Officer Hans Jakob Hegge said he expected oil prices to rise towards the end of the year though Total said prices would remain volatile due to high global inventories.
Executives vowed to keep a tight rein on costs.
“The external price environment and energy sector developments mean we will remain very disciplined,” said Shell chief executive Ben van Beurden.
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Total Chief Executive Patrick Pouyanné said the company had the flexibility to take advantage of the low-cost environment in the sector to launch profitable projects and acquire resources under attractive conditions.
Total maintained its 2017 cost savings target of $3.5 billion, aiming to cut production costs further.
Total and Statoil also beat analyst profit forecasts with Total seeing a strong lift from its high-margin upstream projects.
The companies broadly maintained their spending plans for 2017, with Statoil slightly reducing its exploration budget.
Shell said it had sold some $25 billion of assets to pay off the BG acquisition and analysts said the new projects coming online meant it had a bright outlook.
“What drives Shell on from here is the benefit of the new growth projects that they’ve got coming through at higher cash margins. We’re yet to really to see that come through in the numbers,” Smith said.