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Oil & Gas Stock Roundup: ExxonMobil, Chevron & Shell Report Q4 Earnings

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It was a week where oil futures hit the lowest levels since Aug 7 and natural gas prices ended further below the psychologically important level of $2.

On the news front, integrated supermajors ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) and Royal Dutch Shell (RDS.A - Free Report) reported December quarter earnings. Only Chevron was able to beat bottom-line estimates, riding on the back of strong Permian production.  

Overall, it was another pretty bad week for the sector. West Texas Intermediate (WTI) crude futures suffered a loss of 4.9% to close at $51.56 per barrel, while natural gas prices fell 2.7% for the week to finish at 1.841 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Halliburton, Kinder Morgan & Baker Hughes Report Q4 Earnings)

The crude benchmark fell for the fourth week in a row on fears that the coronavirus outbreak in China would have a severe impact on oil demand. Apart from the health scare fallout, prices also remained under pressure from the impact of U.S. Energy Department's latest inventory release. The report showed that crude stockpiles recorded a large weekly increase.

Natural gas also ended sharply lower following a government publication that showed a smaller-than-expected decrease in supplies. The sentiment was further soured by mild winter weather forecasts amid strong production, which led prices to trickle down to their lowest level in more than three and a half years.

Recap of the Week’s Most Important Stories

1.  U.S. Energy giant ExxonMobil reported unimpressive fourth-quarter 2019 results due to weaker margins in the refining and chemical business. This was partially offset by slightly higher crude price realization and strong liquids production. To be precise, the company’s earnings per share of 41 cents missed the Zacks Consensus Estimate of 44 cents. Moreover, the bottom line declined substantially from the year-earlier period’s $1.51 per share.

In the United States, the company recorded crude price realization of $55.61 per barrel, higher than the year-ago quarter’s $54.50. The same metric for non-U.S. operations rose to $56.61 per barrel from the year-ago level of $53.74. Meanwhile, Liquid production increased to 2.436 million barrels per day (MMBbls/d) from 2.348 MMBbls/d in the prior-year quarter, courtesy of ramped-up activities in the prolific Permian Basin.

During the quarter under review, ExxonMobil generated cash flow of $9.4 billion from operations and asset divestments, boosted by $3.1-billion Norway upstream asset sales, down from $9.5 billion a year ago. Owing to significant investments in the prolific Permian Basin, the company’s capital and exploration spending rose 8% year over year to $8.5 billion At the end of fourth-quarter 2019, total cash and cash equivalents were $3.1 billion, and debt amounted to $46.9 billion. (Read more ExxonMobil Q4 Earnings Lag Estimates on Weaker Margins)

2.   Smaller rival Chevron reported adjusted fourth-quarter earnings per share of $1.49, above the Zacks Consensus Estimate of $1.47. The beat was driven by strong production from the Permian Basin. However, the Zacks Rank #2 (Buy) company’s bottom line was below the year-earlier quarter's earnings of $2.06 per share due to lower oil and natural gas price realizations.

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

America's No. 2 energy producer delivered a soft cash flow performance this quarter – an important gauge for the oil and gas industry – with $5.6 billion in cash flow from operations, down from $9.1 billion a year ago. The decrease in cash flow could be attributed to falling lower price realizations in the upstream business.

In the fourth quarter, Chevron paid $2.3 billion in dividends and repurchased $1.1 billion worth of shares. For the full-year 2019, the company shelled out $9 billion in dividends, and bought back $4 billion of its shares. Chevron recently raised its quarterly dividend from $1.19 to $1.29. (Read more Chevron Q4 Earnings Beat Thanks to Permian Strength)

3.   Europe’s largest oil company Royal Dutch Shell reported fourth-quarter earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of 74 cents, below the Zacks Consensus Estimate of 80 cents and the year-ago profit of $1.38. The underperformance mainly stemmed from lower oil and gas prices.

During the quarter under review, the company’s cash flow from operations slumped 53% from the year-earlier level. Meanwhile, the group raked in $5.4 billion in free cash flow during the fourth quarter, down from $16.7 billion a year ago. Moreover, it was not sufficient enough to take care of its $2.75 billion in share buybacks and its $3.7 billion dividend.

Shell, which delivered on its $30 billion divestment target for 2016-2018, expects first quarter 2020 upstream volumes to be 2,625-2,775 MBOE/d, while Integrated Gas production is expected to be between 950 MBOE/d and 980 MBOE/d. Finally, the company expects full-year 2020 capital budget to revolve around the lower range of the $24-$29 billion band. Shell also announced a further $10 billion of divestments expected during the 2019-2020 period. (Read more Shell Q4 Earnings Miss on Commodity Price Slump)

4.   Downstream operator Phillips 66 (PSX - Free Report) posted fourth-quarter 2019 adjusted earnings per share of $1.54, beating the Zacks Consensus Estimate of $1.53, courtesy of contributions from chemical business. However, the bottom line plunged 68.4% from the year-ago figure of $4.87 due to soft refining margins. In particular, realized refining margins worldwide fell to $9.50 per barrel from the year-ago quarter’s $16.53 per barrel.

In the reported quarter, Phillips 66 generated $1.7 billion of cash from operations. The company returned capital worth $810 million to its stockholders through dividend payouts and share repurchases.

As of Dec 31, 2019, cash and cash equivalents were $1.6 billion along with debt of $11.8 billion. The company’s debt-to-capitalization ratio was 30%. (Read more Phillips 66 Q4 Earnings and Revenues Beat Estimates)

5.   Another oil refiner and marketer Marathon Petroleum (MPC - Free Report) reported adjusted earnings per share of $1.56, above the Zacks Consensus Estimate of 85 cents. The company, which recently announced a 9.4% increase in its quarterly dividend to 58 cents, reported revenues of $31.4 billion that beat the Zacks Consensus Estimate of $29.7 billion.

The beat was driven by higher-than-expected throughput and refined product sales volume, which helped the ‘Refining & Marketing’ segment income to blow away estimates. Operating income from the unit totaled $912 million, significantly ahead of the Zacks Consensus Estimate of $218 million. Total refined product sales volumes and throughput of 3,750 thousand barrels per day (mbpd) and 3,069 mbpd came ahead of the Zacks Consensus Estimate of 3,619 mbpd and 3,052 mbpd, respectively.

In the reported quarter, Marathon Petroleum spent $1.8 billion on capital programs (48% on the Midstream segment). As of Dec 31, the company had cash and cash equivalents of $1.5 billion and a total debt of $28.8 billion, with a debt-to-capitalization ratio of 40.6%. During the fourth quarter, Marathon Petroleum returned $409 million of capital to shareholders.(Read more Marathon Petroleum Q4 Earnings, Revenues Top Estimates)

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

-6.3%

-13.6%

CVX

-4.2%

-10.5%

COP

-5.1%

+8.2%

OXY

-5.9%

-18.9%

SLB

-6.3%

-7%

RIG

-10.6%

-6.1%

VLO

-5.5%

+5.9%

MPC

0.0%

+2.7%

 

The Energy Select Sector SPDR – a popular way to track energy companies – fell 5.6% last week. The worst performer was offshore driller Transocean Ltd. (RIG - Free Report) whose stock slumped 10.6%.

Longer-term, over six months, the sector tracker is down 10%. Houston-based oil and gas producer Occidental Petroleum (OXY - Free Report) was the major loser during this period, experiencing an 18.9% price decline.

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. The Baker Hughes data on rig count will also be on the energy traders' radar, plus the 2019 Q4 earnings, with a number of energy biggies coming out with quarterly results.

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