The first major oil companies to report earnings amid the worst oil crash since 2009 all pledged to protect shareholder payouts even as they announced more than $US20 billion ($25.7 billion) in spending cuts in a span of five hours.

By preserving and even increasing dividends, energy companies are attempting to keep investors on board while they wait for oil and natural gas prices to rebound to more profitable levels. Producers, meanwhile, are choosing to cut drilling programs and workforces to weather a downturn that could extend for years.

Royal Dutch Shell, Occidental Petroleum and ConocoPhillips pledged to slash spending by almost $US10 billion this year alone - enough to drill more than 1,400 shale wells. The risk: cannibalising budgets to feed cash to shareholders may leave companies with reserves too anemic to fuel future output, said Timothy Doubek, who helps manage $US26 billion in corporate debt at Columbia Management Advisors.

"It's a pretty impressive ax they're taking to their drilling budgets, but when the stock is down 30 or 50 per cent, what are they trying to protect by preserving dividend?" Doubek said. "You're protecting a stock price that can't be protected. Why don't you keep as much cash as possible so you can be the first one to take advantage when assets go up for sale?"

Cash outlay

Shell, Occidental and ConocoPhillips handed over more than $US17 billion in dividends to shareholders last year, according to data compiled by Bloomberg. For the full year, Shell and ConocoPhillips paid out $US11.8 billion and $US3.5 billion, respectively. Occidental's dividend bill for the first nine months of 2014 was $US1.69 billion; the company hasn't yet disclosed its fourth-quarter payout.

The scaled-down 2015 investment programs overshadowed a mixed bag of results the companies announced as they closed the books on the fourth quarter. "We see pressure on our investment program," said Shell boss Ben van Beurden. "It's a game of being prudent, but at the same time not overreacting."

Crude oil fell below $US44 a barrel in New York trading Thursday, the lowest in almost six years, as rising US production adds to oversupplies.

Statoil, Tullow Oil and Premier Oil said they've delayed projects or cut exploration spending. BP has frozen wages and Chevron delayed announcing its 2015 drilling budget so that it could reassess the market.

Protecting returns

By cutting spending, companies aim to protect returns to energy investors who count on dividends as a safe haven from commodity price risks.

ConocoPhillips emphasised on Thursday it will protect its dividend above all else, even if it has to increase its dependence on debt. Additional borrowings might reduce the company's credit rating, but not below investment grade levels, said its chief financial officer, Jeff Sheets.

ConocoPhillips investors need to understand that the dividend is "part of their return they will get on our shares that they don't have to be concerned is going down," Sheets said. "The fact that you've committed to that level of payout is going to make you very disciplined about your level of capital investments as well."

Occidental Thursday reported its first quarterly loss in more than a decade, and ConocoPhillips and Hess also saw their first three-month losses in years. Shell reported higher fourth-quarter earnings, but still fell short of analysts' expectations.

Not sustainable

The severe spending cuts aren't a sustainable strategy for oil companies, said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas. Producers must invest in new oil and gas wells for the future to replace dwindling production from older wells.

Shell's van Beurden Thursday warned that canceling or delaying too many projects could jeopardise supply over the longer term.

"They find themselves with the difficult choice of reducing spending or dividends," Bullock said. "Many are choosing to continue paying shareholders, since investing more amid low prices would be seen as providing sub-par returns. Cutting dividends could bring a crushing response from investors."

Some smaller companies are making that hard choice. Canadian Oil Sands said Thursday it will reduce its dividend by 86 per cent to 5 US cents a share from 35 US cents. The cut helps brace the company for "a prolonged period of low oil prices," chief executive officer Ryan Kubik said.

Holding fast

Larger companies so far are holding fast.

"The dividend remains our top priority for capital allocation," ConocoPhillips chairman and chief executive officer Ryan Lance said in a conference call with investors Thursday.

Shell plans to pay a first-quarter dividend of 47 US cents a share, unchanged from the previous two quarters. The company, which plans to defer or cancel about 40 projects worldwide, will cut spending by $US15 billion over three years to make it possible to keep paying shareholders, bringing total cuts announced Thursday for all three companies to $US20 billion.

"The dividend is an iconic item at Shell and I will do everything to protect it," Van Beurden said.

Missing estimates

Profit excluding one-time items and inventory changes was $US3.3 billion in the quarter, up from $US2.9 billion a year earlier, Shell said. That missed the $US4.1 billion average of 13 analyst estimates compiled by Bloomberg.

Shell missing expectations by about 20 per cent "doesn't bode well for competitors," said Kim Fustier, an analyst at Edison Investment Research. 

Occidental swung to a loss of $US3.41 billion after the company wrote down the value of oil and gas fields it won't drill until energy prices rise enough to make them profitable. The company announced $US2.9 billion in spending cuts.

ConocoPhillips, the third-largest US energy producer, said it lost $US39 million and announced $US2 billion in additional spending cuts. The Houston-based company will spend $US11.5 billion drilling wells in projects from Colorado to Indonesia, a decline of almost a third from last year. Exxon Mobil, the world's largest oil company by market value, reports earnings on Monday.

The average price in the quarter for Brent crude, the benchmark used by most of the world, fell 30 per cent from a year before to $US77 a barrel. This month the benchmark extended its decline, touching a low of $US45.19 a barrel on January 13.

Bloomberg News