Despite the nearly 40-percent oil price slide in the fourth quarter, supermajors booked solid sets of Q4 and 2018 results, suggesting that they have learned to raise profits even when oil prices are well below $100 a barrel and may never return to the triple-digit mark.
Three of Big Oil’s five—Shell, ExxonMobil, and Chevron—reported strong figures last week, with many key metrics beating analyst forecasts and some earnings at their highest levels since 2014—the last time the price of oil was above $100 a barrel.
Exxon’s earnings in the last quarter of 2018 easily beat analyst expectations, signaling that the Q4 oil price drop didn’t erode Big Oil’s profits as much as the market had feared.
Exxon booked Q4 earnings of US$6 billion, down from US$8.4 billion in the fourth quarter of 2017. Yet, earnings per share assuming dilution came in at US$1.41, nearly a third above the analyst consensus estimate of US$1.08 of The Wall Street Journal. Exxon’s liquids production in the fourth quarter rose by 4 percent from the prior-year quarter, driven by growth in the Permian. Oil-equivalent production was 4.010 million bpd in Q4, exceeding 4 million bpd for the first time in nearly two years. Despite weaker margins in the downstream and the drop in oil prices in Q4, Exxon’s full-year 2018 cash flow from operating activities jumped to US$36 billion from US$30 billion for 2017. The 2018 cash flow from operations was the highest since 2014, the company said. Related: OPEC’s Oil Princes Are Fighting For Survival
The other U.S. supermajor, Chevron, reported a record annual net oil-equivalent production of 2.93 million barrels per day for 2018, up by 7 percent on the year. For this year, Chevron is planning to further increase production by between 4 percent and 7 percent.
Fourth-quarter earnings at Chevron rose to US$3.7 billion from US$3.1 billion in Q4 2017, or US$1.95 per share versus US$1.64 per share, beating the US$1.87 analyst consensus forecast of The Wall Street Journal.
Before the U.S. supermajors, the first of Big Oil to report Q4 earnings last week was Shell. The Anglo-Dutch oil group was expected to post its highest annual profit since 2014, and it did. Full-year earnings on a current cost of supplies (CCS) basis—Shell’s closest metric to a net profit closely watched by analysts—jumped by 36 percent to US$21.404 billion, reflecting higher realized oil, gas, and liquefied natural gas (LNG) prices.
In 2018, Shell completed its US$30-billion divestment program, paid its entire dividend in cash, cut debt, and launched a share buyback program, with $4.5 billion in shares repurchased so far, Shell’s chief executive Ben van Beurden said.
“We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns,” van Beurden noted. Related: Breakneck LNG Demand Surge In China Is History
The other two of Big Oil’s top five—BP and Total—are scheduled to report Q4 and 2018 earnings on February 5 and February 7, respectively.
According to data from FactSet carried by The Wall Street Journal, the top five oil majors are set to book combined annual profits of US$84 billion for 2018. This would be a 13-percent increase compared to the annual combined profits for 2014, when oil prices last traded at $100 a barrel. To compare, in 2018, oil prices averaged $71 per barrel, and Q4 saw the price of oil plunging by almost 40 percent between early October and end-December, when fears of oversupply and of potentially faltering demand growth resulted in several severe sell-offs.
Three of the world’s five biggest oil firms have shown so far this earnings season that supermajors can boost profits even if oil prices never return to $100 a barrel.
By Tsvetana Paraskova for Oilprice.com
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