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Big Oil Is Set To Disappoint Again With Q1 Results

Oil majors will start reporting financial results for the first quarter later this month, prompting the usual flurry of analyst predictions, where some are very confident that Big Oil will make their shareholders happy, and others, such as Barclays, are playing the naysayer, warning of disappointing figures.

The British bank is especially gloomy when it comes to Exxon and Chevron. For the former, it expects earnings per share of $0.79, versus a Wall Street consensus of $0.89, based on the fact that its fourth-quarter 2016 results included asset sale gains of almost a billion dollars, and according to Barclays, the other banks have failed to factor this in their forecasts for the first quarter.

It’s true that last quarter Exxon missed Thomson Reuters analyst EPS estimates by $0.29, reporting $0.41 per share. Yet in the first quarter the company has been quite active in ensuring sustainable growth, such as focusing much more on shale and on offshore projects abroad, including in what could be the next hot spot for oil – Guyana.

The company just announced striking oil in its third well off the coast of the South American country, with reserves in the block it operates now estimated at up to 2 billion barrels. That’s not too shabby after Exxon had to write off its reserves in Canada’s oil sands because they became unviable at current market prices for Canadian crude.

Related: China Ready To Cut Oil Supplies To North Korea

Chevron, Barclays believes, will miss analyst predictions for its Q1 results by an even wider margin: consensus is for EPS of $0.92, while the British bank sees them at $0.78, citing lower international oil prices in March and an overestimation on the part of other analysts of Chevron’s refining and marketing performance.

Jefferies Research indeed has a $0.92 EPS forecast for Chevron along with a “Buy” rating, even though this major also missed analyst estimates in its fourth-quarter performance. For October to December Chevron reported earnings of $0.22 versus expectations of $0.64.

Still, the company is, like its peer, going into shale and selling assets, which could boost its figures. Earlier in the quarter it closed the sale of some non-core assets in Indonesia, and now there are reports that it is mulling over the divestment of its oilsands interests – a deal that could fetch $2.5 billion.

Chevron is also betting big on LNG, which, according a more optimistic analyst team, that of Jefferies, will help it to boost its overall production and financial performance. The research firm notes Chevron’s tight capital spending control and fast growth projects in the Permian to justify its prediction that the company’s stock price could shoot up to $147. Some of these positive developments are bound to be reflected in the Q1 report.

Related: Will Shale Kill Off The Oil Price Rally Again?

Barclays is upbeat about ConocoPhillips, if only because of its massive $13.3-billion Canadian asset sale to Cenovus. By the way, Conoco yesterday announced another divestment, this one worth $3 billion, of gas assets in the San Juan Basin, in the Southwestern U.S. This would certainly be welcomed by shareholders—a focus on core operations and a nice cash injection to be used for reducing debt and “general corporate purposes” as Conoco’s CEO said in the announcement of the latest divestment.

Analysts rarely agree on everything. In fact, most often there are striking differences among forecasts. That’s because forecasts involve quite a lot of assumptions on top of the interpretation of facts. For Barclays, a missed estimate may be a huge disappointment, but for others it may be more important by what margin the estimate was missed. All that is left is to wait and see.

Chevron and Exxon are reporting first-quarter figures on April 28 before the bell, and ConocoPhillips will be releasing its report on May 2nd.

By Irina Slav for Oilprice.com

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