While higher commodity prices during the past three years have enabled international oil companies (IOCs) to make record profits and build up cash, their ability to replenish oil reserves will be something to watch, reports Standard & Poor's.

"IOCs face changing economic and political climates in many of the countries in which they operate, which could increase difficulties in accessing new E&P resources," S&P reports. "U.S.-based IOCs are limited from tapping the reserves in countries like Syria, Iran and the Sudan for a variety of security and humanitarian reasons.

"Coupled with a shortage of equipment and skilled labor, the IOCs are facing the need to adapt to these new market realities."

Tina Vital, integrated oil and gas equity analyst, S&P equity research, adds, "A new wave of resource nationalism, which has been on the rise over the past several years, is forcing international oil companies to deal with changes in royalty contracts and income taxation...

"We believe that IOCs will need to exploit their core competencies, size and technology by moving into frontier regions and new markets, unconventional oil and gas plays, and innovative deal-making in order to keep pace."

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