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Oil & Gas Stock Roundup: Exxon, Chevron, Shell Report Q2 Earnings

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It was a week where both oil and natural gas prices settled lower.

On the news front, integrated majors ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) and Royal Dutch Shell (RDS.A - Free Report) reported second-quarter earnings.

Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures fell 1% to close at $55.66 per barrel, while natural gas prices dropped 1.4% for the week to finish at $2.121 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: BP and TOTAL Report Q2 Earnings)

The U.S. crude benchmark touched its lowest settlement since Jun 19 after President Donald Trump vowed to push ahead with additional tariffs on $300 billion of Chinese imports. The latest setback in relations with China is threatening to dampen global growth and affect oil demand.   

Natural gas prices posted a loss too as the U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in supplies that was also higher than the five-year average and the year-ago rise.

Recap of the Week’s Most Important Stories

1.  Energy giant ExxonMobil reported better-than-expected second-quarter 2019 earnings, courtesy of ramped up liquid volumes in the prolific Permian Basin. This was offset partially by scheduled downtime activities in downstream and chemical operations. To be precise, the company reported earnings of 73 cents per share, which beat the Zacks Consensus Estimate of 68 cents.

Total production averaged 3.909 million barrels of oil-equivalent per day (MMBOE/d), higher than 3.647 MMBOE/d a year ago. In particular, liquid production increased year over year to 2.389 million barrels per day (MMB/D) from 2.212 MMB/D, courtesy of ramped-up activities in the prolific Permian Basin.

During the quarter under review, ExxonMobil generated cash flow of almost $6 billion from operations and asset divestments, down from $8.1 billion a year ago. Owing to significant investments in the prolific Permian Basin, the company’s capital and exploration spending shot up 22% year over year to $8.1 billion. (Read more ExxonMobil Q2 Earnings Top Estimates on Permian Volumes)

2.   Smaller rival Chevron reported strong second-quarter earnings, boosted by record production. The company reported earnings per share of $2.27, ahead of the Zacks Consensus Estimate of $1.74 and the year-ago profit of $1.78.

The U.S. energy major’s results were also positively impacted by a fee it received for the failed merger attempt with Texas-based upstream company Anadarko Petroleum Corp. In May, Chevron ended its attempt to buy Anadarko, after it decided not to compete with Occidental Petroleum’s offer. The termination of the deal triggered a break-up fee of $1 billion to Chevron. These factors were partially offset by drop in profits in its downstream business, which refines crude oil into fuels like gasoline and diesel oil.

Importantly, America's No. 2 energy producer behind ExxonMobil delivered a solid cash flow performance this quarter – an important gauge for the oil and gas industry – with $8.7 billion in cash flow from operations, up from $6.9 billion a year ago. (Read more Chevron Q2 Earnings Boosted by Production, Breakup Fee)

3.   Europe’s largest oil company Royal Dutch Shell reported earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of 86 cents, below the Zacks Consensus Estimate of $1.22 and the year-ago profit of $1.12. The worse-than-expected bottom line could be attributed to lower oil and gas prices.

The Hague-based Shell reported revenues of $91.8 billion, which were 7.5% below the second-quarter 2018 sales of $99.3 billion but marginally beat the Zacks Consensus Estimate of $91.6 billion on higher production. Meanwhile, Zacks Rank #3 (Hold) Shell will repurchase $2.75 billion worth of shares up to Oct 28 in the fifth installment of its three-year $25 billion buyback program.

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

The company’s cash flow from operations rose 16.1% from the year-earlier level. Meanwhile, the group raked in $6.9 billion in free cash flow during the second quarter, down from $9.5 billion a year ago. However, it was sufficient enough to take care of its $2.75 billion in share buybacks and its $3.8 billion dividend. (Read more Shell Q2 Earnings Miss as Commodity Prices Fall)

4.   ConocoPhillips (COP - Free Report) reported second-quarter 2019 adjusted earnings per share of $1.01, missing the Zacks Consensus Estimate of $1.04 and declining from the year-ago figure of $1.09. The world’s largest independent oil and gas producer’s weak second-quarter 2019 earnings are primarily attributable to lower realized commodity prices, partially offset by higher volumes from the company’s unconventional assets.

As of Jun 30, 2019, the oil giant had $5,941 million in total cash and cash equivalents. The company had a total long-term debt of nearly $14,809 million, representing a debt-to-capitalization ratio of 31%.

In the reported quarter, ConocoPhillips generated $2.9 billion in cash from operating activities. Capital expenditures and investments totaled $1.7 billion, and dividend payments grossed $346 million. The company repurchased shares worth $1,250 million in the quarter. Notably, the company generated around $600 million in proceeds from dispositions, in the quarter under review. (Read more ConocoPhillips' Q2 Earnings Miss on Lower Crude Prices)

5.   U.S. shale play EOG Resources (EOG - Free Report) delivered second-quarter 2019 adjusted earnings per share of $1.31, whichmissed the Zacks Consensus Estimate of $1.33 and declined from the year-ago $1.37. The underperformance was mainly because of lower price realization for crude oil and condensates, and higher lease and well operating expenses.

On a positive note, in the quarter under review, EOG Resources’ total volume rose 16% year over year to 74 million barrels of oil equivalent (MMBoe). Crude oil and condensate production in the quarter totaled 455.7 thousand barrels per day (MBbl/d), up 18% from the year-ago quarter level. Natural gas liquids (NGL) volumes increased 16% year over year to 131.1 MBbl/d. Natural gas volumes rose to 1,356 million cubic feet per day (MMcf/d) from the year-earlier quarter’s level of 1,228 MMcf/d.

For At the end of the second quarter, the company had cash and cash equivalents of $1,160.5 million and long-term debt of $4,165.3 million. This represents a net debt-to-capitalization ratio of 16%. During the quarter, the company generated $2.1 billion in discretionary cash flow, nearly the same as the year-ago comparable quarter.(Read more EOG Resources Q2 Earnings Miss Estimates, Revenues Beat)

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 6 months.

Company

Last Week

Last 6 Months

XOM

-4.1%

-5%

CVX

-2.4%

+1%

COP

-3.9%

-19%

OXY

-0.8%

-26.7%

SLB

-4.6%

-18%

RIG

-5.5%

-42%

VLO

-2.7%

-8.4%

MPC

-5.7%

-22.2%

The Energy Select Sector SPDR – a popular way to track energy companies – was down 3.3% last week. The worst performer was downstream operator Marathon Petroleum (MPC - Free Report) whose stock fell 5.7%.

Longer-term, over six months, the sector tracker is down 7.4%. Offshore driller Transocean Ltd. (RIG - Free Report) was the major loser during this period, experiencing a 42% price plunge.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly. Energy traders will also be focusing on the Baker Hughes data on rig count and the 2019 Q2 earnings, with a few S&P 500 members coming out with quarterly results.

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