BG Group is a good example of an international oil company that will continue to invest in Australia even with the huge drop in oil prices.

Andrew Gould, BG interim executive chairman, said in the company’s fourth quarter 2014 financial results, “We will continue to invest in Brazil and Australia, which are both businesses with relatively low costs of production and will continue to deliver growth.”

He noted in his comments that “this is the fourth abrupt downturn in oil and gas prices that I have experienced in my career. It is always a surprise and, as an industry, we are very bad at predicting downturns.”

There is a realisation that in a period of weak demand growth a new source of supply has come to the market, and therefore the influence of OPEC or any other swing producer is diminished, he emphasised.

There are exploration opportunities across the company’s new and existing basins. In its February 2015 investor update, BG Group said it had about 2,350 wells drilled in Australia with another 1,600 wells available for production or dewatering. The Queensland Curtis LNG plant began LNG production in December 2014 and three cargoes were shipped in January.

Train 2 is expected to begin production in the third quarter. By mid-2016 plateau production of 8 million tonnes per annum is scheduled. In 2015, hub exploration will continue in Australia. BG Group spent US$5.7 billion in 2013 and US$3.6 billion in 2014. The company plans to spend about US$1.8 billion in 2015.

The excess oil and gas supply in the U.S. is primarily from shale plays, Gould explained. Decline rates are between 60 per cent and 80 per cent in the first year. “The time necessary to bring supply and demand back into balance will depend on two things: some resumption of the growth in demand; and a slowdown in drilling in the U.S. Please don’t ask me how long this will take.”

BG Group will be lowering its capex spending, partly to reflect the completion of projects. “New projects will undergo far more scrutiny and sensitivity analysis at lower price levels. Where we can’t achieve the desired economics, we will defer or cancel projects.”

Santos is going through the same type of reduction. On 11 December 2014, it dropped its 2015 capex budget to $2 billion from the previous guidance of $2.7 billion.

“We remain on track to realise the cash flow benefits in 2015 and 2016 from our growth investments in recent years,” David Knox, Santos managing director and CEO, said,” The PNG LNG project is producing at full capacity. The GLNG project is 90 per cent complete and remains on track for first LNG in the second half 2015.”

Santos is focused on driving operational efficiency, reducing costs, prudently managing capital and making sure its balance sheet remains strong—without making short-term reactive decisions that could damage the long-term interests of the company or the interests of shareholders, Knox continued.

An 8 February report Bloomberg noted that some energy companies may not cut oil production after the 50 per cent drop in crude oil prices so that those companies can service debt, according to the Bank for International Settlements. That could, in turn, slow the recovery of the E&P business.

Drillsearch, for example, has “placed additional hedge protection against the falling oil price in FY2015 in the form of new put options at US$70/ bbl effective from December. Combined with hedging in place in connection with our undrawn $50 million working capital facility, these provide Drillsearch with significant price protection for FY2015. With the continuing fall in the oil price through December, these have already delivered a net revenue benefit of $3 million. Subsequently, and given the continuing decline in the oil price during the December quarter, the company locked in further hedge protection for FY2016 in the form of additional put options.”

There are ways to survive the downturn and smart companies will come out ahead when prices go back up again—and prices will go up again.