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Oil & Gas Stock Roundup: TOTAL & BP Report Q4 Earnings

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It was a week where the U.S. crude benchmark fell into a bear market and natural gas prices stayed below the psychologically important level of $2.

On the news front, European supermajors TOTAL S.A. (TOT - Free Report) and BP plc (BP - Free Report) reported December-quarter earnings wherein they beat bottom-line estimates.  

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures dropped 2.4% to close at $50.32 per barrel, natural gas prices inched up 0.9% for the week to finish at 1.858 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 fifth week in a row on fears that the coronavirus outbreak in China would have a severe impact on oil demand. The health scare, which send oil prices sliding below the psychologically important $50-a-barrel for the first time in more than a year, was partly offset by the U.S. Energy Department's latest inventory release that revealed decrease in gasoline and distillate supplies. Further, indications that the OPEC+ group is preparing deeper output cuts to stem the decline, also had a slight positive effect on prices.

Meanwhile, natural gas ended slightly higher following a larger-than-expected decrease in supplies. However, the optimistic sentiment was overwhelmed by mild winter weather forecasts amid strong production, which caused prices to stay under $2.

Recap of the Week’s Most Important Stories

1.  French behemoth TOTAL reported fourth-quarter 2019 operating earnings of $1.19 per share (€1.07 per share), beating the Zacks Consensus Estimate of $1.01 by 17.8%. The bottom line also improved 1% from the year-ago figure of $1.17 per share (€1.02 per share). The outperformances were primarily due to rise in production volumes, marginally offset by softness in the prices of commodities. The company also hiked its fourth-quarter dividend to 68-euro cents per share, as per its previously outlined policy to raise annual payout by 5% to 6%.

Cash and cash equivalents as of Dec 31, 2019 were $27.4 billion compared with $27.9 billion at the end of 2018. Net debt-to-capital was 20.7% at the end of the quarter, up from 15.5% in the comparable period of 2018. TOTAL repurchased shares worth $1.75 billion in 2019 and projects to buy back $2 billion shares in 2020. These buybacks are part of the $5-billion buyback program for the 2018-2020 period.

TOTAL expects organic production growth of more than 2% in 2020 driven by startups in 2019 and the ones expected in 2020, notably lara 2 in Brazil. The company has been engaged in cost-saving initiatives and aims to continue the same in 2020. These actions will likely result in cumulative cost savings of $5 billion by the end of 2020. TOTAL continues to sell non-core assets and plans to divest assets worth $5 billion during 2019 and 2020. (Read more TOTAL Q4 Earnings Beat on Solid Support From Startups)

2.   British supermajor BP reported fourth-quarter 2019 adjusted earnings of 76 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line surpassed the Zacks Consensus Estimate of 65 cents but deteriorated from the year-ago quarter’s $1.04. BP also raised its quarterly dividend from 61.50 cents to 63 cents.

Higher oil equivalent volumes, backed by key upstream projects, primarily contributed to the better-than-expected earnings performance. However, this was partially offset by lower commodity price realizations, declined refinery throughput outside the United States and Europe, and narrower heavy crude oil discounts in the fuels business.

BP's net debt — including leases — was $55,006 million at the end of the fourth quarter, higher than $44,144 million in the prior-year period. Gearing was recorded at 31.1%, up from 30% in the prior-year quarter. The company has a divestment target of $10 billion by 2020-end, of which $9.4 billion has been announced. It plans to add another $5 billion worth of assets in the divestment-list by mid-2021. (Read more BP Q4 Earnings Trump Estimates on Key Upstream Projects)

3.   Upstream major ConocoPhillips (COP - Free Report) reported fourth-quarter 2019 adjusted earnings per share of 76 cents, missing the Zacks Consensus Estimate of 81 cents. Also, the bottom line declined from the year-ago figure of $1.13 per share. The weak fourth-quarter 2019 earnings are primarily attributable to lower production volumes and declined realized commodity prices, partially offset by reduced operating costs.

As of Dec 31, 2019, the oil giant had $5,088 million in total cash and cash equivalents. The company had a total long-term debt of nearly $14,790 million, representing a debt-to-capitalization ratio of 30%. In the reported quarter, ConocoPhillips generated $2,982 million in net cash from operating activities, lower than the year-ago level of $3,783 million. Capital expenditures and investments totaled $1,595 million, and dividend payments grossed $463 million. The Zacks Rank #3 (Hold) company repurchased shares worth $749 million in the quarter.

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

For 2020, its production guidance is projected in the range of 1,230-1,270 MBoe/d, excluding Libya. For first-quarter 2020, its production is expected in the range of 1,240-1,280 MBoe/d. Operating cost for the year is expected to be $5.9 billion. For 2020, its capital guidance is projected in the range of $6.5-$6.7 billion. The company expects to buy back $3 billion shares in 2020. It added $10 billion to the already existing share repurchase program, which brings the total authorization to $25 billion. (Read more ConocoPhillips Misses on Q4 Earnings, Boosts Buyback)

4.   Canadian operator Suncor Energy (SU - Free Report) reported operating earnings per share of 39 cents, which lagged the Zacks Consensus Estimate of 50 cents. The miss was attributable to lower output contribution from Fort Hills and Syncrude operations. However, the bottom line improved 40.74% from the prior-year figure of 27 cents per share, driven by strong production in the East Coast Canada and Oda.

Cash flow from operating activities was C$2,304 million in the fourth quarter, down 24.2% from the prior-year figure of C$3,040 million. The company incurred capital expenditure worth C$1,738 million in the quarter under discussion. As of Dec 31, 2019, Suncor Energy had cash and cash equivalents of C$1,960 million and total long-term debt of C$12,884 million. Its total debt-to-capitalization ratio was 23.45%.

In a shareholder-friendly measure, Suncor Energy announced an 11% dividend rise. This strategic move is indicative of the company’s commitment to create value for its shareholders and its high confidence level in business growth. The firm raised its quarterly dividend to 46.5 Canadian cents per share on its stock. The amount will be paid out on Mar 25, 2020 to its shareholders of record as of Mar 4. This profit distribution marks the company’s 18th consecutive annualized dividend hike. Suncor Energy’s board also approved a new stock repurchase authorization program of up to additional C$2 billion, effective Mar 1.  (Read more Suncor Q4 Earnings and Revenues Miss Mark, Improve Y/Y)

5.   Oil equipment and service provider National Oilwell Varco (NOV - Free Report) reported adjusted earnings of 13 cents per share in fourth-quarter 2019, missing the Zacks Consensus Estimate of 16 cents as North American drillers scale back their production growth plans, leaving less scope of work for the likes of National Oilwell Varco. However, the bottom line improved from the year-ago earnings of 3 cents. Particularly, better-than-expected revenue contribution from the Rig Technologies and the Wellbore Technologies segments led to this outperformance.

Capital equipment order backlog for Rig Technologies was $3 billion as of Dec 31, 2019 including $211 million worth of new orders. At year-end, the company had cash and cash equivalents of $1.17 billion and long-term debt of $1.99 billion. The debt-to-capitalization ratio was 20.22%.

Although the domestic oil producers are unlikely to increase their spending anytime soon, the company sees a stronger offshore and aftermarket business. In response to the changing market dynamics, National Oilwell Varco will likely sustain its disciplined approach to capital spending and improvement in its efficiency level.(Read more National Oilwell Q4 Earnings Lag Estimates, Rise Y/Y)

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

-1%

-13.9%

CVX

+1.7%

-9.7%

COP

-2.4%

+8.9%

OXY

+5.5%

-10%

SLB

+2.7%

+0.2%

RIG

+4.2%

+3.7%

VLO

-0.3%

+9.4%

MPC

+0.3%

+18.8%

 

The Energy Select Sector SPDR – a popular way to track energy companies – rose 1% last week. The best performer was Houston-based oil and gas producer Occidental Petroleum (OXY - Free Report) whose stock jumped 5.5%.

Longer-term, over six months, the sector tracker is down 8%. Integrated behemoth ExxonMobil (XOM - Free Report) was the major loser during this period, experiencing an 13.9% 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 few energy biggies coming out with quarterly results.

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