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Martin Tillier

Martin Tillier

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How To Play The Oil Majors In 2016

This week saw the first of the major multinational, diversified energy companies reporting earnings for the first calendar quarter of 2016. As expected, they have not been pretty in year on year terms, but, as I suggested last week may be the case, most have beaten the drastically cut analysts’ estimates for the quarter. BP (BP), Total S.A. (TOT), Conoco Phillips (COP) and Exxon Mobil (XOM) all had better than expected quarters, with only Chevron (CVX) missing.

Of course that doesn’t mean that everything in the garden is rosy. Most expressed caution, and even worry, about the rest of this year and, while beating expectations is obviously a good thing, all reported huge declines in both EPS and revenue from last year. It is interesting, though, that despite Q1 covering the period when WTI dropped as low as $26.05, only Chevron and Conoco actually reported a loss for the quarter. This indicates the benefits of integrated operations, where the steady cash flow from midstream and downstream business offset the losses from E&P when prices are low.

That is not the only bright spot either. Gloomy forecasts are the only way that CEOs of these companies can go given what has transpired over the last year or so, and reports of cutbacks in capital expenditure, layoffs and other cost saving measures have been the order of the day. In the darkness, however, there were signs of light. Total in particular hinted that they may be looking at improvement as the year progresses.…




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