LIKE A GOOD MOTORIST

Some messages go unheeded.

Despite all the media hand-wringing about falling energy prices, this doesn't appear to be one of them when it comes to the major oil companies if what we read is even remotely accurate.

According to the Financial Times, ConocoPhillips "plans to cut it capital spending next year as falling oil prices squeeze its  revenues."

Ryan Lance, the company's chief executive recently told analysts that it plans to cut 2015 expenditures, less than the $16 billion it spent in 2014. Lance also said Conoco had "increased flexibility" to respond to market conditions that included the option to cut "back its drilling in less-developed shale areas of the US." 

If the big boys have that financial flexibility, what's that say for all those smaller marginal shale drillers? 

Over at Royal Dutch Shell they just appointed a new chairman, Chad Holliday, an American industrialist-turned banker, who's known for having an environmentally-friendly lean in his corporate makeup, an area where not only Royal Dutch but other majors have had their problems. Holliday is set to start next year.

Royal Dutch, like its brethren Conoco and others, has said it already is factoring in the volatility of energy prices, according to today's Wall Street Journal.

Part of the point of the majors is that their heft allows them to keep investing for the long term regardless of market volatility, so companies won’t slam the brakes on spending. Balance sheets are pretty strong: Shell’s net debt to total capital is about 12%, with BP at 15% and France’s Total at about 21%. Most big oil companies use an assumption of $70 or $80 a barrel when assessing potential projects.

Based on the past year’s experience, though, investors will reward companies that pledge to trim investment and costs further. So the majors, who argue that some 90% of near-term investment is already committed, will need to find room to maneuver.

That should be possible. BP has spent more slowly than intended this year, with capital expenditure set to come in $1 billion to $2 billion below target. Total’s new chief executive is asking his team to budget for further savings. Total also has more room to trim, in that past investment and project startups should already help cash flows in the coming years.

Meanwhile, the majors are pledging already to work their suppliers harder, aiming to time the contracting of rigs and other equipment for new projects to take advantage of a falling market. That is good news for investors looking for a hiding place amid oil’s volatility, but not so much for the beleaguered oil services sector.

So like good motorists taking advantage of lower gasoline prices, be a good investor and take advantage of all the hand-wringing to own some solid companies with decent dividends on the cheap.