Last checked at 
By Ron Bousso and Dmitry Zhdannikov
LONDON/DAVOS, Jan 23 (Reuters) - Europe's oil majors willstrike a sober note in their fourth-quarter results andinvestors will focus on companies' plans to maintain cherisheddividends and their strategies to cope with the oil pricescollapse that caught many unawares.
Having sold around $120 billion in assets in recent years toboost balance sheets and keep up dividend payouts, companies areexpected to increase borrowing and further cut costs as theycome to terms with oil prices that have more than halved sinceJune to around $50 a barrel.
"Lower oil prices pose the biggest threat to oil and gasindustry earnings and financial solidity since the financialcrash of 2008," consultancy Wood Mackenzie said in a note.
"More evidence of how this is affecting performance andstrategy will appear in the Q4 results and further pared-back2015 investment plans."
For the last quarter of 2014, earnings per share (EPS) forEuropean integrated oil companies, including Royal Dutch Shell, BP, France's Total, Italy's Eni and Spain's Repsol, are expected to fall onaverage by around 24 percent, according to Barclays analysts.
As investors come to terms with a roughly 20 percent drop inoil companies' shares since last June, according to Reutersdata, the focus will turn to how boards plan to adjust to thenew environment.
So far there is no hint of any major oil companies scalingback their dividend payouts, which for decades have been the keyattraction for investors. Shell, for example, has not cut itsdividend since 1945.
"We will be able to preserve the dividend. It is absolutelyour rock solid intention," BP Chief Executive Bob Dudley toldReuters on the sidelines of the World Economic Forum in Davos,Switzerland.
"Your cash flow spending options are dividends, buy backs,capex and cost - these are really the four things you can workwith," Dudley added.
Total CEO Patrick Pouyanne also said it would maintaindividends while Eni chief Claudio descalzi told Reuterstelevision he was confident prices would rebound and that thecompany would be also able to sustain dividends.
SPENDING
Nomura and Barclays analysts expect an average 7 percentyear-on-year decline in spending in 2015 for European oilmajors. But with a large part of this year's project spendingalready committed, borrowing is inevitable.
"Ultimately, Big Oil remains on the back foot and thetransition to more sustainably covering capex and the dividendis pushed out further to 2017 on our base-case estimates,"Nomura analysts said in a note.
Analysts at Jefferies say that with an estimated average netdebt to capitalization ratio of 14 percent at the end of 2014,oil majors are in a good position to increase borrowing, whichthe bank expects will reach 21 percent by the end of 2016.
Shell is seen by several investors and analysts as best ableto cope among its peers in the current environment as itsrefining segment benefits the most from lower crude oil prices.Barclays expect Shell EPS to rise by 29 percent in the fourthquarter compared with the same quarter the previous year.
"At a high level I believe RDS (Shell) is the bestpositioned as it has the best balance sheet," said DarrenSissons, managing director at Toronto-based investment fundPortfolio Management, which holds Statoil, Shell and BP sharesin Europe.
Shell will report fourth-quarter results on Thursday, Jan.29.
Barclays expects BP will report a 50 percent fall in fourth-quarter EPS compared with the same quarter in 2013. Itfaces a heavy loss from its stake in Russia's Rosneft due to theplummeting oil price and a crumbling rouble.
It will cut thousands of jobs across its global oil and gasbusiness by the end of this year in a $1 billion restructuringprogramme, it said last month.
(Reporting by Ron Bousso; editing by Susan Thomas)
