With oil prices falling to less than half of the previous $100 per barrel, the basic principle we mustadhere to is to increase cash flow and bolster the cash we have at our disposal. To this end, we must cut costs, restrain spending, and increase production at an appropriate level. It is also important to minimize risk money. Put simply, it is to restrain investment and concentrate on assets which generate sound returns.
On the other hand, continued investment is necessary for sustained growth. If we were to discontinue investment because of the uncertain outlook for oil prices, our future would not be guaranteed. What is required is to strike a balance between increased profits and investment.
In addition, a positive side effect of suppressed oil prices is a decrease in development costs such as EPCI contract prices and drilling rig dayrates.
As mentioned in the book “Private Empire”, the strategic goal of E&P companies is the replacement of reserves against the backdrop of resource nationalism. This is indeed our fundamental, long term, and most important goal.
It is impossible to foresee how our environment will change; it is not possible to predict the future. Therefore, it is important not to neglect the preparation of elements that are within one's control. The fundamental countermeasure for dealing with uncertainty is to do the ordinary in an ordinary manner.
Japex has been undertaking operational reforms to strengthen its competitiveness over the last several years, and they form the basis of our consideration of measures to deal with this low oil price environment. The first half of this presentation will be on the status of E&P companies worldwide, and the second half will deal with the situation at Japex.
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