* Oil majors to increase borrowing to maintain dividends
* Asset sales have yielded $150 billion over four years
* Investments to fall as revenues drop with low oil prices (Adds KPMG quote)
By Ron Bousso
LONDON, Nov 28 (Reuters) - With oil company revenues set todrop on the back of a rout in prices, boards will have to cutinvestments and increase borrowing to maintain their cherisheddividend payouts.
OPEC's decision on Thursday not to cut production in orderto prop up oil prices sent markets reeling. Oil company sharesslumped, wiping billions off firms' market value and leavingdividend payouts as the only solace for shareholders.
The world's top oil companies including BP, RoyalDutch Shell, Total, ExxonMobil andChevron are already in the midst of a painfulbelt-tightening process.
They have hacked back spending and sold assets worth around$150 billion over the past four years, increasingly relying onthat income to reward shareholders.
The idea that companies cannot turn a profit by simplypumping oil from the ground will be strange to anyone who hasnot kept up with the industry's transformation in recentdecades.
Oil majors are employing more complex technology to open upmore marginal prospects and keep oil and gas output growing,sending their operating costs soaring in recent years.
The realisation that oil prices could remain in the $70-$80a barrel range for a prolonged period, after averaging around$110 a barrel between 2011 and 2013, is putting renewed strainon already lean balance sheets.
And as their boards prepare to present their 2015 budgets atthe beginning of the year, they face some tough choices.
BORROWING TO RISE
With a dwindling number of available assets for sale,companies are now expected to benefit from their low gearinglevels in order to maintain dividends.
"While oil prices are below $80 the majors will be payingdividends out of debt. They can live with higher gearing butthey will not cut dividends," said Iain Reid, analyst at BMOCapital Markets investment bank.
"Majors could easily live with gearing of up to 40 percent(of equity) and the market won't punish them so much becausethey are resilient."
At the end of the third quarter, Shell, BP, Chevron andExxon all had debt-to-equity ratios well below 20 percent, whileTotal's ratio was higher at 29 percent, according to thecompanies' results.
COST CUTTING
As they come to terms with the new oil regime, companieswill cut spending by up to 10 percent in 2015 from a this yearand delay new project approvals.
"Projects that are under construction will move forward, butnew project will be delayed. I don't think we will see manyfinal investment decisions (FIDs) in the first half of 2015,"said Jason Gammel, analyst at Jefferies..
Investors will move to safe havens such as Shell, which hasa very sound balance sheet, Gammel said.
A number of analysts expect oil and gas exploration to feelthe brunt of the cuts with up to 20 percent declines in 2015budgets.
"This (lower oil prices) will add further pressure toexploration budgets, as upstream players batten down the hatchesand reduce their exposure to high-risk prospects," Anthony Lobo,UK Head of Oil & Gas at KPMG, said.
Goldman Sachs analysts estimate that European integrated oilcompanies require oil at $122 a barrel to maintain their budgetsat current capital expenditure budgets. (Reporting by Ron Bousso; editing by Keith Weir, Tom Pfeifferand Jane Merriman)
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