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Oil & Gas Stock Roundup: A Whole Lot of Big Oil Earnings

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It was a week when both oil and natural gas prices registered small declines.

On the news front, integrated supermajors ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) , Royal Dutch Shell (RDS.A - Free Report) , TotalEnergies (TTE - Free Report) and Eni (E - Free Report) reported September-quarter earnings.

Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 0.2% to close at $83.57 per barrel, while natural gas prices fell 0.6% to end at $5.426 per million British thermal units (MMBtu). In particular, the oil market was down slightly after rising for nine weeks in a row.

Coming back to the week ended Oct 29, the oil rally took a break after a report from the Energy Information Administration ("EIA") showed a surprise addition to crude stockpiles. The commodity’s negative price reaction was also blamed on an increased probability of talks aimed at reviving the Iranian nuclear deal that could eventually increase the nation’s oil exports.

Natural gas finished down too despite a lower-than-expected increase in supplies. A bearish turn in weather forecasts primarily sparked off a pullback in the fuel’s price.

Recap of the Week’s Most-Important Stories

1.  Energy major ExxonMobil’s third-quarter 2021 earnings per share of $1.58 — excluding identified items — beat the Zacks Consensus Estimate by a penny. The better-than-expected earnings were due to improved realized oil and natural gas prices, and higher refining and chemical margins. The company also informed that it will launch up to a $10-billion share repurchase program next year. ExxonMobil will conduct the stock buyback program over 12 to 24 months.

The Zacks Rank #1 (Strong Buy) company’s upstream segment reported quarterly earnings of $4 billion against a loss of $383 million in the year-ago comparable quarter. Meanwhile, the downstream unit recorded a profit of $1.3 billion against a loss of $231 million a year ago. ExxonMobil’s chemical business recorded a $2.1-billion profit, skyrocketing from earnings of $661 million in the year-ago quarter.

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

Ahead of the earnings release, the company announced its fourth-quarter dividend of 88 cents per share, reflecting an increase from 87 cents in the third quarter of this year. Following the increase, the integrated energy giant’s annual dividend for 2021 is $3.49 per share, higher than $3.48 in 2020. (ExxonMobil Tops Q3 Earnings Estimates, Plans $10B Buyback)

2.   Smaller rival Chevron reported adjusted third-quarter earnings per share of $2.96, comfortably beating the Zacks Consensus Estimate of $2.21. The company’s impressive earnings reflects higher commodity prices and production, plus an increase in refined products’ sales.

The company recorded $8.6 billion in cash flow from operations, more than doubling from $3.5 billion a year ago. The soaring cash flow could be attributed to strong price realizations in the upstream business. Importantly, Chevron’s free cash flow for the quarter was a record $6.7 billion.

In the third quarter, Chevron paid $2.6 billion in dividends and bought back $625 million worth of its shares. The company spent $2.8 billion in capital and exploratory expenditures during the quarter compared to the year-ago period’s $2.6 billion. Some 84% of the total outlays pertained to upstream projects. As of Sep 30, the San Ramon, CA-based company had $6 billion in cash and cash equivalents and total debt of $37.3 billion with a debt-to-total capitalization of about 21.6%. (Chevron Q3 Earnings Top, Sets Free Cash Flow Record)

3   Europe’s largest oil company Royal Dutch Shell reported third-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.06. The bottom line came in below the Zacks Consensus Estimate of $1.41 due to lower production.

As of Sep 30, 2021, the company, which upped its carbon reduction target, had $38.1 billion in cash and $95.4 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 25.6%, down from 31.4% a year ago. Shell’s cash flow from operations increased 54% from the year-earlier level. Meanwhile, the group raked in $12.2 billion in free cash flow during the third quarter, up from $7.6 billion a year ago.

Meanwhile, Third Point, Daniel Loeb’s activist hedge fund, which has a $500 million stake in the company, is pursuing a breakup of Shell into multiple businesses, arguing that this could unlock significant value. (Shell Misses on Q3 Earnings, Targeted by Hedge Fund)

4.   French multinational TotalEnergies reported third-quarter 2021 operating earnings of $1.76 (€1.49) per share, beating the Zacks Consensus Estimate of $1.56 by 12.8%. The outperformance stems from an increase in commodity prices and global economic recovery.

Operating income was $5,374 million, up 268.3% from the year-ago period due to higher commodity prices. Interest expenses for the reported quarter were $454 million, down 17.3% from $549 million in the year-ago period. In third-quarter 2021, TotalEnergies acquired $126 million worth of assets and sold assets valued at $1,084 million. During the quarter, it acquired a 10% interest in the Lapa block in Brazil.

Cash and cash equivalents as of Sep 30, 2021 were $28.9 billion compared with $30.6 billion in the corresponding period of 2020. Net debt to capital was 22.1% at quarter-end, down from 26.1% at third-quarter 2020 end. Cash flow from operating activities at second-quarter end was $5,640 million, up 29.6% year over year. (TotalEnergies Q3 Earnings Beat Estimates, Sales Up Y/Y)

5.  Eni reported third-quarter 2021 adjusted earnings from continuing operations of 93 cents per American Depository Receipt (ADR), beating the Zacks Consensus Estimate of 81 cents. The strong quarterly results were attributed to higher realizations of average liquids and natural gas prices. Improved refinery throughputs also backed the outperformance.

As of Sep 30, Eni had long-term debt of €21,369 million and cash and cash equivalents of €7,364 million. Its debt to capitalization was 39.3%. For the reported quarter, net cash generated by operating activities amounted to €2,933 million. Capital expenditure totaled €1,232 million.

The company projects its 2021 cash flow from operations, before changes in working capital at replacement cost, to grow to approximately €12 billion. The Italy-based integrated energy player reaffirmed its hydrocarbon production target for 2021 at 1.7 million oil-equivalent barrels per day (MMBOE/d). For the December quarter, the energy giant projects hydrocarbon production at 1.76 MMBOE/d. The company continues to project organic capital expenditure for this year at €6 billion. (Eni Q3 Earnings Beat Estimates on Refinery Throughputs)

Price Performance

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

Company    Last Week    Last 6 Months

XOM                 +2.1%             +14.7%
CVX                  +1.5%             +11.1%
COP                  -1%                +45.9%
OXY                   -1.2%             +37.3%
SLB                   -4.9%             +23.1%
RIG                    -9.5%             +9.6%
VLO                    -4.5%             +5.5%
MPC                   -2.4%             +20.9%

The Energy Select Sector SPDR — a popular way to track energy companies — edged down 0.8% last week. The worst performer was offshore driller Transocean (RIG - Free Report) whose stock lost 9.5%.

But over the past six months, the sector tracker has increased 18.4%. Upstream biggie ConocoPhillips (COP - Free Report) was the major gainer during the period, experiencing a 45.9% price appreciation.

What’s Next in the Energy World?

As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will closely track 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 oilfield 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. Finally, there will be 2021 Q3 earnings, with a host of S&P 500 names coming up with quarterly results.

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