Back to top

Image: Bigstock

Oil & Gas Stock Roundup: Breaking Down Big Oil Q1 Earnings

Read MoreHide Full Article

It was a week when both oil and natural gas prices settled higher.

On the news front, integrated supermajors ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) , Royal Dutch Shell (RDS.A - Free Report) , BP plc (BP - Free Report) and TOTAL SE reported March-quarter earnings.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained 2.3% to close at $63.58 per barrel, while natural gas prices rose 7.4% in the week to end at $2.931 per million British thermal units (MMBtu). In particular, the oil market reversed its decline from the previous week, when the commodity fell 1.7%.

Coming back to the week ended Apr 30, oil prices moved up after member countries of the OPEC+ group — a coalition between OPEC countries under kingpin Saudi Arabia and non-members led by Russia — continued with their gradual loosening of the output cuts, reflecting their confidence in the fuel’s usage. Crude is also finding support from positive economic data and an improving earnings picture that has further strengthened the demand outlook.  

Natural gas finished up too due to the ongoing strength in liquefied natural gas demand and pipeline exports to Mexico.

Recap of the Week’s Most-Important Stories

1.  Energy major ExxonMobil’s first-quarter 2021 earnings per share of 65 cents — excluding identified items — beat the Zacks Consensus Estimate of 59 cents. The better-than-expected earnings were owing to higher chemical margins and improved realized commodity prices.

The Zacks Rank #1 (Strong Buy) company’s upstream segment reported quarterly earnings of $2.6 billion, up from profits of $536 million in the year-ago comparable quarter. Meanwhile, the downstream unit recorded a loss of $390 million, narrower than the loss of $611 million a year ago. ExxonMobil’s chemical business recorded a $1.4-billion profit, skyrocketing from earnings of $144 million in the year-ago quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

During the quarter under review, ExxonMobil generated cash flow of $7.6 billion from operations and asset divestments. The company's capital and exploration spending declined 56.1% year over year to $3.1 billion. At the end of first-quarter 2021, total cash and cash equivalents were $3.5 billion and debt amounted to $63.3 billion. The energy giant reaffirmed its expectations for 2021 capital spending at $16 billion to $19 billion. (ExxonMobil Q1 Earnings and Revenues Beat Estimates)

2.   Smaller rival Chevron reported adjusted first-quarter earnings per share of 90 cents, missing the Zacks Consensus Estimate of 92 cents. Chevron’s earnings disappointment reflects lower production, plus a decline in refined products margins. This was partly offset by the integrated energy major’s successful cost-reduction initiatives, which allowed it to reduce capital spending by 43% from the year-ago levels.  

The company recorded $4.2 billion in cash flow from operations, down from $4.7 billion a year ago. In the first quarter, Chevron paid out $2.5 billion in dividends. As of Mar 31, the San Ramon, CA-based company had $7.1 billion in cash and cash equivalents and total debt of $45.4 billion with a debt-to-total capitalization of about 25.6%.

Chevron spent $2.5 billion in capital and exploratory expenditures during the quarter, down significantly from the year-ago period’s $4.4 billion. More than 84% of the total outlays pertained to upstream projects. (Chevron Q1 Earnings Miss Estimates, Revenues Beat)

3.  Europe’s largest oil company Royal Dutch Shell reported first-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of 82 cents. The bottom line came in ahead of the Zacks Consensus Estimate of 79 cents. The outperformance was mainly backed by stronger commodity prices and robust chemical margins.

Shell, which boosted its quarterly dividend by about 4% to 17.35 cents per share as per its February announcement, had $31 billion in cash and $102.4 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 29.9%, up from 28.9% a year ago.

During the quarter under review, Shell generated cash flow from operations of $8.3 billion, returned $1.3 billion to its shareholders through dividends and spent $3.9 billion cash on capital projects. The company’s cash flow from operations fell 44.2% from the year-earlier level. Meanwhile, the group raked in $7.7 billion in free cash flow during the first quarter, down from $12.1 billion a year ago. (Shell Q1 Earnings Beat on Higher Commodity Prices)

4.  London-based BP reported first-quarter 2021 adjusted earnings of 77 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line beat the Zacks Consensus Estimate of earnings of 43 cents per share due to higher realizations of commodity prices.

BP's net debt — including leases — was $42,380 million at first-quarter end versus $60,618 million in the prior-year quarter. Gearing was recorded at 31.9% compared with 40.1% in the prior-year quarter. The British energy giant expects oil demand to recover this year on the rollout of coronavirus vaccines and the relaxation of social-distancing measures. The company added that the strong growth in the United States and China is aiding oil demand.

Since the company has successfully reduced net debt below its $35-billion target, it is planning to launch share buybacks worth $500 million in the June quarter. For 2021, the company reaffirmed its projection for capital spending at around $13 billion. Notably, the integrated energy firm projected 2021 payments associated with the Gulf of Mexico oil spill incident at $1 billion post tax. (BP Tops Q1 Earnings Estimates, Aims to Resume Buybacks in Q2)

5.  French multinational TOTAL reported first-quarter 2021 operating earnings of $1.10 (€0.91) per share, beating the Zacks Consensus Estimate of 85 cents by 29.4%. The outperformance stems from an increase in commodity prices, its strategy of boosting liquefied natural gas (LNG) production, and focus on renewables as well as clean electricity generation.

Cash and cash equivalents as of Mar 31, 2021 were $30.3 billion compared with $21.7 billion in the corresponding period of 2020. Net debt to capital was 23.7% at quarter end, down from 25% at first-quarter 2020 end. Cash flow from operating activities at first-quarter end was $3,736 million, down 5% year over year.

TOTAL expects stable hydrocarbon production in 2021, backed the resumption of production from Libya. Management continues with cost-saving initiatives and targets savings of $0.5 billion and production costs close to $5 per boe for 2021. TOTAL expects to invest in the range of $12-$13 billion in 2021. Nearly 50% of the planned growth investment will be directed to expand its renewable and clean electricity generation operation. (TOTAL Q1 Earnings Beat Estimates, Revenues Drop Y/Y)

Price Performance

The following table shows the price movement of some the major oil and gas players over past week and during the last six months.

Company    Last Week    Last 6 Months

XOM                  +3%                +76.1%
CVX                   +1.5%            +47%
COP                  +2.9%            +79.9%
OXY                   +2.9%            +169.8%
SLB                   +5.2%            +79.1%
RIG                   +2.5%             +288.5%
VLO                   +5.4%             +97.6%
MPC                 +5%                 +79.1%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 3.9% last week. The best performer was refiner Valero Energy (VLO - Free Report) whose stock rose 5.4%.

Over the past six months, the sector tracker has surged 71.9%. Offshore driller Transocean (RIG - Free Report) was the major gainer during the period, experiencing a 288.5% price appreciation.

What’s Next in the Energy World?

As global oil consumption outlook strengthens amid the OPEC+ led calibrated supply cuts and successful vaccine deployments, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is closely followed too. There will also be 2021 Q1 earnings, with a number of S&P 500 components coming up with quarterly results. Finally, news related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>