* Oversupply will extend into 2017 - ConocoPhillips, Statoil
* Expect more creative ways to offer dividends
By Gwladys Fouche and Karolin Schaps
STAVANGER, Norway, Aug 30 (Reuters) - Oil companies aredeepening cost cuts through efficiency and standardisation tostay profitable while maintaining dividends as a supply glutpushes back a potential recovery in the price of crude, topexecutives and analysts said.
The sector has slashed jobs, projects and investments tocope with a 60 percent downturn in crude prices over the pasttwo years, with consultancy Wood Mackenzie putting the drop inexploration and production spending by the top 56 oil and gasfirms at 49 percent, or $230 billion, over the period.
But hopes for a steep recovery in prices have been dashed bypersistent oversupply, meaning companies must keep hammeringcosts for at least another year, industry players gathered for aconference in Norway's oil capital, Stavanger, said.
Ryan Lance, chief executive of ConocoPhillips, theworld's largest independent oil company, said the key was tolower the breakeven costs of projects "as much as you can" andto try to keep some cash flexibility.
"You'd better not have everything tied up in very largeprojects because you may have to deal with a 70 percent declinein revenues over six months," he said.
"Cost-cutting is going to continue," Lance said.
On Monday, Norway's Statoil said it had managed toreduce costs further on the initial phase of its giant JohanSverdrup field, the largest North Sea oil find of the last threedecades, to 99 billion crowns ($12 billion) from an originalforecast of 123 billion crowns.
The company is reviewing its entire portfolio to identifyprojects that could be developed with better concepts, moreefficient drilling and standardised methods, all in an effort tobring down its breakeven costs further.
Others are doing the same. The cost of developing the Zidanegas field off Norway has been cut by 20 percent, John Browne,executive chairman of Russian billionaire Mikhail Fridman'sinvestment vehicle LetterOne, told the conference. LetterOnecontrols DEA, which operates the field.
The potential return to the market of some 1.5 millionbarrels per day of oil supply from Libya and Nigeria plusuncertainty about Iranian and Iraqi production could push arebalancing further away than many in the industry are hoping.
"The oversupply will extend into 2017," Lance said.
Wim Thomas, Shell's chief energy adviser, toldReuters: "All these things, when they come back on the market,can again postpone the true balancing."
The most upbeat scenario from Thomas was for the market torebalance later this year. "It can happen any time between thesecond half of this year and the second half of next year."
Statoil CEO Eldar Saetre, also speaking to Reuters, said:"It can be a long time into 2017 before we see the inventoriessituation normalise itself."
In the meantime, oil companies will have to protect marginsas they do not want to suspend payments to shareholders.
DIVIDENDS PROTECTED
"The majors will not cut dividends," said Pareto Securitiesanalyst Trond Omdal, noting that Shell had not reduced suchpayouts since World War Two. He believes oil companies have roomto lower costs further.
"They can continue to cut capex through postponing projects,optimalising and simplifying new project designs, cooperatebetter with suppliers and/or squeeze margins," he said.
Companies may also opt to increase scrip dividendprogrammes, meaning the offering of new shares at a discount asan alternative to cash dividends.
"In 2017 oil firms will still give priority to dividendsabove greenlighting new projects," said Swedbank analyst TeodorSveen-Nilsen.
"They would rather pay dividends than sanction newprojects." (Additional reporting by Stine Jacobsen and Joachim Dagenborgin Stavanger; Editing by Dale Hudson)
