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Oil & Gas Stock Roundup: A Look at BP, COP, EOG, MPC & PSX Q2 Earnings

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It was a week when oil prices experienced a steep decline, although natural gas consolidated its hold over the $4 level.

On the news front, energy firms BP plc (BP - Free Report) , ConocoPhillips (COP - Free Report) , EOG Resources (EOG - Free Report) , Marathon Petroleum (MPC - Free Report) and Phillips 66 (PSX - Free Report) reported June-quarter earnings. All the companies beat bottom-line estimates and turned around their year-ago losses.

Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures lost 7.7% to close at $68.28 per barrel, while natural gas prices gained 5.8% to end at $4.14 per million British thermal units (MMBtu).

Oil prices finished significantly lower as the rapidly spreading Delta variant outbreak presents the latest threat to global economic recovery, particularly in China. The latest wave of COVID-19 has stoked concerns about crude demand growth during the remainder of this year. Prices were also pulled down by a stronger dollar, which made the fuel more expensive to the holders of other currencies.  

On the other hand, natural gas benefited from strong cooling demand and robust LNG export shipments.

Recap of the Week’s Most-Important Stories

1.  London-based BP reported second-quarter 2021 adjusted earnings of 83 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line beat the Zacks Consensus Estimate for earnings of 61 cents and turned around the year-ago loss of $1.98 due to higher realizations of commodity prices.

The board of directors approved a dividend hike of 4% in the June quarter to 5.46 cents per ordinary share. Before announcing the results for the third quarter, the Zacks Rank #1 (Strong Buy) company plans to buy back $1.4 billion worth of shares by utilizing surplus cashflow that was generated through the January-to-June period.

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

BP's net debt — including leases — was $41,678 million at second quarter-end versus $50,161 million in the prior-year quarter. Gearing was recorded at 30.9% compared with 37.7% in the prior-year quarter. The British energy giant expects oil demand to recover this year on the rolling out of coronavirus vaccines and the relaxation of social-distancing measures. By the second half of next year, the company expects oil demand to recover to the pre-pandemic levels. (BP Beats Q2 Earnings Estimates, Hikes Dividend Payout)

2.   ConocoPhillips reported second-quarter 2021 adjusted earnings per share of $1.27, comfortably beating the Zacks Consensus Estimate of $1.15. Further, the figure significantly improved from adjusted loss of 92 cents per share a year ago. The outperformance stemmed from increased production volumes due to the Concho acquisition and rising realized commodity prices.

Based in Houston, TX, one of the world’s largest independent oil and gas producers. ConocoPhillips’ capital expenditures and investments totaled $1,265 million, and dividend payments grossed $583 million. Net cash provided by operating activities was recorded at $4,251 million, up from the year-ago figure of $157 million. It generated free cash flow of $2.8 billion in the second quarter. As of Jun 30, 2021, the oil and gas giant had $6,608 million in total cash and cash equivalents, reflecting a massive jump from the first-quarter level of $2,831 million. It had a debt-to-capitalization ratio of 0.31

The company reiterated its full-year production guidance at 1.5 million barrels of oil equivalent per day (MMBoe/d). The figure indicates an improvement from the 2020 level of 1.1 MMBoe/d. Third-quarter production will likely be within 1.48-1.52 MMBoe/d. (ConocoPhillips Q2 Earnings Beat on Higher Oil Prices)

3.  Upstream energy company EOG Resources reported second-quarter 2021 adjusted earnings per share of $1.73, beating the Zacks Consensus Estimate of $1.54 and improving from the year-ago loss of 23 cents. The strong results were driven by increased commodity prices and production volumes.

At second quarter-end, EOG Resources had cash and cash equivalents of $3,880 million, sequentially higher than $3,388 million at first-quarter end. Long-term debt was reported at $5,086 million, marginally down from the first-quarter level. The current portion of the long-term debt was recorded at $39 million. It had a debt to total capitalization of 19.7%.

In the quarter, the company generated $2,030 million in discretionary cash flow and $1,058 million of free cash flow. It incurred $972 million of cash capital expenditure before acquisition in the second quarter. (EOG Resources Q2 Earnings Beat on Higher Crude Prices)

4.  Independent oil refiner and marketer Marathon Petroleum reported second-quarter adjusted earnings of 67 cents per share, which beat the Zacks Consensus Estimate of 45 cents. Marathon Petroleum had incurred with a loss of $1.33 per share in the year-ago period. The company’s bottom line was favorably impacted by stronger-than-expected performance from both segments. Precisely, operating income from the Refining & Marketing and the Midstream units totaled $224 million and $977 million, respectively, ahead of their Zacks Consensus Estimate of $145 million and $949 million.

Refining margin of $12.45 per barrel increased from $7.64 a year ago. Total refined product sales volumes were 3,489 thousand barrels per day (mbpd), up from the 2,878 mbpd in the year-ago quarter. Throughput rose from 2,276 mbpd in the year-ago quarter to 2,854 mbpd and beat the Zacks Consensus Estimate of 2,774 mbpd. Capacity utilization during the quarter was up from last year’s 71% to 94%.

In the reported quarter, Marathon Petroleum spent $467 million on capital programs (38% each on Refining & Marketing and the Midstream segments) compared to $807 million in the year-ago period. As of Jun 30, the company had cash and cash equivalents of $11.8 billion and a total debt, including that of MPLX, of $28.3 billion, with a debt-to-capitalization of 44.2%. (Marathon Q2 Earnings Top as Refining Margins Strengthen)

5.  Another downstream operator Phillips 66 reported second-quarter 2021 adjusted earnings per share of 74 cents, beating the Zacks Consensus Estimate of 71 cents. The bottom line turned around from a loss of 74 cents in the year-ago quarter. The strong quarterly results were driven by recovered product demand as more people are stepping out for work and leisure owing to the rapid rolling out of coronavirus vaccines.

The company’s realized refining margins on a worldwide basis improved to $3.92 per barrel from the year-ago quarter’s $2.60. The same in Central Corridor, Gulf Coast and Atlantic Basin/Europe increased to $6.40, $2.1 and $4.63 per barrel from the year-ago level of $5.78, 36 cents and $1.53, respectively.

For the reported quarter, Phillips 66 generated $1,743 million of net cash from operations. Its capital expenditures and investments totaled $380 million. It paid dividends of $394 million in the reported quarter. As of Jun 30, 2021, cash and cash equivalents were $2.2 billion. Total liquidity of the company was $7.9 billion. Consolidated debt was $15.4 billion, reflecting a debt to capitalization of 43%. (Phillips 66 Q2 Earnings Beat Estimates on Demand Recovery)

Price Performance

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

Company    Last Week    Last 6 Months

XOM               +0.5%            +14.6%
CVX                +0.1%            +11.8%
COP               +0.8%            +23.2%
OXY                +1.1%            +7.5%
SLB                -1.4%             +9.9%
RIG                 -4.8%             +2%
VLO                +0.7%            +3.6%
MPC               +4%               +18.9%

The Energy Select Sector SPDR — a popular way to track energy companies — edged up 0.2% last week. The best performer was downstream operator Marathon Petroleum whose stock gained 4%.

Over the past six months, the sector tracker has increased 13.7%. Upstream biggie ConocoPhillips was the major gainer during the period, experiencing a 23.2% price appreciation.

What’s Next in the Energy World?

As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will be closely tracking the regular releases to watch for signs that could further validate the upward momentum. 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 the energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is closely followed too. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.