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Oil Majors Remain Upbeat Despite Poor Second Quarter

Oil Rigs

U.S.-based oil and gas majors Chevron (ticker: CVX), ExxonMobil (ticker: XOM), and ConocoPhillips (ticker: COP) all reported their second quarter earnings last week, each showing significant hits from the continued oil and gas downturn. Chevron reported a loss of $1.5 billion ($0.78 per diluted share), Exxon reported a year-over-year decline in profit of 59 percent (Q2 earnings of $1.7 billion or $0.41 per share), and ConocoPhillips reported a net loss of $1 billion ($0.79 per share).

Despite the significantly lower earnings posted by each, the three majors remain positive about the future of their assets.

Chevron increasing its drilling program in the Permian

During Chevron’s conference call, CVX Senior Vice President of Upstream James Johnson said the company plans to add an additional four rigs to its Permian drilling program by the end of the year.

“We continue to want to grow our Permian business. So we are adding an additional rig in August,” said Johnson. “We expect to have a total of four additional rigs. So that’s going from six currently to 10 rigs by the end of this year in the Permian. And would expect to see good performance coming from those rigs.

One of the things we’ve tried to do is take a measured pace, so that we preserve the productivity and the capital efficiency that we’ve been able to capture so far. We want to make sure we do that as we ramp up. And we feel quite confident we can do so.”

As the company continues to focus its spending on the areas it feels offer the greatest returns, unconventionals could become roughly 25 percent of the company’s portfolio.

“Unconventional, with the de-risking that we’ve been able to do – particularly in the Permian. And then the way we’re using best practice in one field to spread to all the others we have – the Marcellus, the Permian, the Duvernay, Vaca Muerta – is really showing benefits right across our unconventional portfolio. And we’re quite excited about the role this is going to play going forward,” said Johnson. Related: Oil In Freefall Following A Bout Of Bearish News

Johnson went on to comment about trains 2 and 3 of the Gorgon LNG plant, saying that Train 2 is expected to come online in the fourth quarter, with Train 3 following in roughly six to eight months. The completion of Chevron’s LNG project will also lower the company’s capital expenditures as well.

Exxon expands PNG LNG capabilities

ExxonMobil said it reduced its rig count in the Permian by one during its conference call. Exxon VP of Investor Relations Jeff Woodbury said the company is now running ten rigs in the play.

“In terms of going forward, we want to be mindful of a number of factors. We generally manage this with a very measured pace considering a number of factors that would drive how aggressive we want to be in the near-term,” said Woodbury. “We don’t want to outrun the headlights and we don’t want to miss some value opportunities. You need to have the right infrastructures in place. And then there’s obviously considering the current supply/demand balance.”

The company’s recent acquisition of InterOil also expanded the company’s natural gas capabilities in Papua New Guinea, where its PNG LNG project produced 7.4 million tons per annum, exceeding the original design capacity by 7 percent, in 2015. The InterOil acquisition adds 4 million acres to Exxon’s Papua New Guinea assets.

“This acquisition provides ExxonMobil access to six additional licenses in Papua New Guinea, totaling about 4 million acres,” said Woodbury. “Elk-Antelope complements our existing discovered undeveloped resources, such as P’nyang, better positioning the co-ventures to expand the existing operation with additional LNG trains.”

(Click to enlarge)

Source: PNG LNG

ConocoPhillips looking for ways to thrive in a down market

One question during ConocoPhillips’ earning call pointed to the fact that the company was near free cash flow in the second quarter even at $45 oil, and asked what the company plans to do to continue driving down costs. Related: Saudi Arabia Unmoved By Oil Price Uncertainty

“We’ve got three things all working in our favor. We’re higher on volumes, we’re lower on CAPEX and we’re lower on OpEx,” said Senior Vice President Alan Hirshberg. “And so all those things are moving in the right direction to help drive down our breakeven cost of capital. We’ve trimmed back our guidance on CAPEX and OpEX to reflect that. But we continue to make a lot of progress there.”

“And we’re not satisfied with where the numbers are at today,” added ConocoPhillips CEO Ryan Lance. “And we’ve got a lot of effort to continue to drive them down to get the same scope done for less capital and less cost as well. Because we’ve got to continue to attack that breakeven and make sure we get the breakeven for the company down as low as we possibly can and be as competitive as we can in this business. Because we believe this world of low and a lot of volatility in prices is here to stay, so we’ve got to thrive in the down cycle.”

By Oil & Gas 360

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  • SAHUL HAMEED on August 03 2016 said:
    Exxon mobile 2nd quarter 2016 financial result shows 808 million USD earnings in Non-US upstream jobs even the upstream sector is down around the world!

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