Oil industry profits expected to fall sharply
HOUSTON — Big Oil is set for another big flop.
For the second straight quarter, Exxon Mobil, Royal Dutch Shell and most of the world’s largest oil companies are poised to report quarterly earnings that pale in comparison to a year ago, when results were buoyed by crude prices that topped out near $150 a barrel.
The April-June results may be somewhat better than first-quarter earnings, which were the lowest in several years, but declines of 50 percent or more from a year ago are likely to be the norm. That’s what happens when oil prices plunge more than 60 percent and slumping demand for gasoline cuts into refining profits.
Natural gas prices have fallen sharply too as the world grapples with a severe recession that’s crushed energy consumption.
“Prices have come down so dramatically since the second quarter of last year, I think you can expect (earnings comparisons) to be off maybe 60 percent on average,” said Brian Youngberg, an analyst at Edward Jones.
To understand how earnings can fall so much in a year, look no further than what majors like Chevron Corp. are getting for the oil and natural gas they’re pumping.
During the first two months of the second quarter, Chevron said the price it received for crude averaged $48.79 a barrel, up from $36.85 in the first three months of 2009 but not even close to the $113.97 a barrel it averaged in the year-ago quarter.
Natural gas prices for the first two months of the second quarter averaged $3.26 for 1,000 cubic feet. That’s below the $4.14 it realized in the first quarter and well off the $9.84 it got a year ago.
In addition, Chevron, the No. 2 U.S. oil company behind Exxon Mobil Corp., said second-quarter earnings would be hit hard by lower results at its refining arm. In particular, the company said refining margins were far lower than those of a year ago.
Refining margins reflect the difference between the cost of crude and what the company makes on refined products such as gasoline. Those margins have been squeezed by rising crude prices, which are up about 20 percent since the end of the first quarter, and weak demand for all types of fuel.
“Second-quarter numbers for refiners will be ugly, and the third quarter, at this rate, will be uglier still,” Credit Suisse said in a recent report.
A benefit for consumers has been lower gasoline and other fuel bills. On average, pump prices are roughly 40 percent lower than they were a year ago, when gasoline topped $4 a gallon.
The oil sector is scheduled to begin reporting results for the April-June period next week, with oilfield services giant Halliburton Co. set to kick things off Monday. Most of the oil majors, including Exxon Mobil, are set to report the last week of July.
On a per-share basis, Wall Street analysts polled by Thomson Reuters expect Exxon, the world’s largest publicly traded oil company, to post second-quarter earnings of $1.06 a share, 53 percent below year-ago results. But that would be an improvement from the 92 cents it earned in the first quarter, Exxon’s lowest profit in more than five years.
The same analysts expect Chevron’s per-share profit to tumble 64 percent from a year ago, and ConocoPhillips’ overall results to fall 76 percent.
In the face of lower commodity prices and earnings, many producers are scaling back spending on capital projects and looking for other ways to trim costs. The American Petroleum Institute said Monday that drilling for oil and natural gas in the second quarter dipped to the lowest level in five years.
Investors will be watching closely in the coming weeks for evidence that companies are finding ways to cut expenses. They’ll also be keeping a close eye on oil and gas production, which makes up the bulk of profits.
Marathon Oil Corp. said Tuesday that daily oil and natural gas production available for sale during the second quarter is expected to be about 411,000 barrels of oil equivalent, ahead of prior guidance between 385,000 and 405,000 BOE.
“Declining production has been an ongoing problem for a lot of these companies,” Youngberg said. “It’s closely watched. It gives everyone a gauge of the direction the company is going.”
Related News
Shares of major oil companies tumble as crude prices decline with slumping consumer demandAugust 17th, 2009 Shares of oil majors tumble with crude pricesNEW YORK — Shares of major oil companies fell sharply on Monday, as crude oil prices tumbled amid new reports that signaled continued consumer spending restraint. Benchmark crude for September delivery at one point fell as much as 3 percent to $65.23 a barrel on the New York Mercantile Exchange.
Norway's StatoilHydro posts zero profit in 2Q, blames lower crude, gas pricesAugust 4th, 2009 Norway's StatoilHydro 2Q profit lands at zeroOSLO — Norwegian oil company StatoilHydro ASA on Tuesday saw its profits vanish in the second quarter and blamed lower crude and gas prices. The state-controlled oil concern said its net profit for the April through June period plummeted to zero kroner from 18.9 billion kroner ($3.1 billion) in the same time last year, when oil prices soared.
Norway's StatoilHydro posts zero profit in 2Q, cites lower crude and gas pricesAugust 4th, 2009 Norway's StatoilHydro 2Q profit falls to zeroOSLO — Norwegian oil company StatoilHydro ASA on Tuesday saw its profits vanish in the second quarter and cited lower crude and gas prices. The state-controlled oil concern said its net profit for April through June period plummeted to zero kroner from 18.9 billion kroner ($3.1 billion) in the same time last year, when oil prices soared.
Spanish oil company Repsol-YPF reports 2Q profits down 59 percent on lower pricesJuly 30th, 2009 Repsol-YPF reports 2Q profits down 59 percentMADRID — Spanish oil company Repsol-YPF said Thursday its net profits for the second quarter dropped by 59 percent because of lower oil prices and the global economic slowdown. Repsol-YPF reported earnings of euro373 million ($526.08 million), compared with euro905 million for the same period last year.
Aviation fuel prices slashed, but fares unlikely to be cutJuly 15th, 2009 NEW DELHI - With a fall in international prices of crude, state-run oil companies Wednesday slashed aviation fuel prices by almost 6 percent. The new prices will be effective Wednesday night and come after four consecutive hikes.
We will roll back price hike if crude prices stabilize: DeoraJuly 9th, 2009 NEW DELHI - Union Minister of Petroleum and Natural Gas Murli Deora on Thursday said that government will roll back the price hike of Rs 4 and Rs 2 a-litre on petrol and diesel respectively, if international crude oil prices stabilise between 50 to 60 dollars a barrel. "Yes, we will cut prices if crude prices stabilise for sometime between 50 and 60 dollars per barrel," Murli Deora said.
Government refuses to roll back fuel price hikeJuly 2nd, 2009 NEW DELHI - Union Petroleum Minister Murli Deora Thursday refused to roll back the increase in fuel prices but said that a revision will be considered when the international crude oil prices come down. The government Wednesday allowed state-run oil firms to increase prices of transport fuels, resulting in petrol becoming dearer by Rs.4 per litre and diesel by Rs.2 per litre.
Chevron says first-quarter profit falls 64 percent on lower crude, gas pricesMay 1st, 2009 Chevron 1Q profit falls 64 pct as oil prices dropHOUSTON — The top international oil companies were expected to deliver the ugliest first-quarter results in several years, and there were few surprises. Chevron Corp.
Aviation fuel prices cut by Rs.311 per kilolitreApril 30th, 2009 NEW DELHI - State-run oil companies Thursday announced a cut in aviation fuel prices by Rs.311 per kilolitre (kl), after three consecutive hikes. The aviation turbine fuel (ATF) will now cost Rs.31,615 per kl in Delhi, effective from Thursday midnight, an Indian Oil Corp (IOC) official said.
Exxon Mobil 1Q profit down 58 percent as lower crude, gas prices cut into earningsApril 30th, 2009 Exxon Mobil 1Q profit falls 58 percentHOUSTON — Exxon Mobil Corp. said Thursday first-quarter earnings fell 58 percent from a year ago, its lowest profit in more than five years, as the world's biggest publicly traded oil company saw crude and gas prices fall precipitously.
Occidental Petroleum profit falls 80 percent on plummeting oil and gas pricesApril 23rd, 2009 Occidental Petroleum profits down 80 percentHOUSTON — Occidental Petroleum said Thursday its first-quarter profit fell 80 percent from a year ago as results were crushed by lower oil and natural gas prices. The company still beat Wall Street expectations and shares in premarket trading rose 2.7 percent, or $1.51, to $57.07.
Reliance Industries quarterly profit down 9.4 pct, sales off 24.9 pct on low crude pricesApril 23rd, 2009 Reliance Industries quarterly profit falls 9.4 pctMUMBAI, India — Indian oil, gas and petrochemicals giant Reliance Industries Ltd. said Thursday that quarterly profits fell 9.4 percent and sales fell 24.9 percent, as waning demand pushed global crude prices lower.
Reliance Industries net down 1 percentApril 23rd, 2009 MUMBAI - India's largest private sector company, the Mukesh Ambani-controlled Reliance Industries, Thursday reported a 1 percent drop in net profits for the quarter ended March 31 at Rs.3,874 crore (Rs.38.74 billion or $774.8 million). The turnover of the oil refining to retail major also dipped nearly 24 percent at Rs.29,073 crore for the fourth quarter in what had been a difficult year for oil refining companies in the wake of high crude prices and lower margins.
Aviation fuel prices raised againMarch 31st, 2009 NEW DELHI - After raising aviation turbine fuel (ATF) prices March 15 by about 1.69 percent, or Rs.162 per kilolitre (kl), state-run oil companies once again raised prices by an average of Rs 2,750 per kl. ATF will now cost around Rs.29,900 per kl, or about 10 percent more, industry source said.
Reduction in fuel prices unfair: Asian Development Bank officialJanuary 13th, 2009 NEW DELHI - A senior Asian Development Bank (ADB) official has questioned the Indian government's policy decision to reduce retail fuel prices, but preventing oil companies from charging market rates when global prices were at a peak. 'Is it right that when oil prices were at a peak, companies were not allowed to charge the appropriate price.
Loading ...