• 3 minutes Don't sneeze. Coronavirus is a threat to oil markets and global economies
  • 5 minutes Boris Johnson taken decision about 5G Huawei ban by delay (fait accompli method)
  • 9 minutes This Battery Uses Up CO2 to Create Energy
  • 12 minutes Shale Oil Fiasco
  • 3 hours Historian Slams Greta. I Don't See Her in Beijing or Delhi.
  • 9 hours We're freezing! Isn't it great? The carbon tax must be working!
  • 1 day Indonesia Stands Up to China. Will Japan Help?
  • 20 hours US (provocations and tech containment) and Chinese ( restraint and long game) strategies in hegemony conflict
  • 8 hours Beijing Must Face Reality That Taiwan is Independent
  • 1 day Tesla Will ‘Disappear’ Or ‘Lose 80%’ Of Its Value
  • 1 day Environmentalists demand oil and gas companies *IN THE USA AND CANADA* reduce emissions to address climate change
  • 22 hours Might be Time for NG Producers to Find New Career
  • 2 days Phase One trade deal, for China it is all about technology war
  • 18 hours Trump has changed into a World Leader
  • 2 days Anti-Macron Protesters Cut Power Lines, Oil Refineries Already Joined Transport Workers as France Anti-Macron Strikes Hit France Hard
  • 2 days Angela Merkel take notice. Russia cut off Belarus oil supply because they would not do as Russia demanded
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

Oil & Gas Earnings Set To Surpass Expectations

In the first look at a series of earnings reports in the energy sector from the third quarter, there is a bit of a mixed picture offered up on the sector’s performance.

Most analysts are pretty pessimistic about what is forthcoming. The third quarter encompassed a period of time in which both oil and natural gas prices fell. It also saw investor scrutiny continue to rise, the rig count continue to fall, and production gains showed more signs of flattening out.

“We expect oil and gas company results to be downbeat for US operations, with oil production growth stalled, negative hurricane effects for those with US Gulf operations, and prices too low to promote much short-term optimism,” Standard Chartered wrote in a note.

So far, it hasn’t been all bad news. ConocoPhillips beat consensus estimates, in large part because of a big asset sale, which it used to increase shareholder payouts. Notably, the company’s shale output jumped by 21 percent, year-on-year. Excluding the asset sales, earnings were down sharply from a year earlier. Still, its share price rose on the news.

BP also exceeded expectations, reporting underlying replacement-cost profit of $2.3 billion, which was nevertheless down 41 percent from the same period in 2018. When including a rather large write-off, the company posted its first quarterly loss in more than three years. That wasn’t a surprise, however, since the company announced the impairment weeks ago.

Related: Russia Releases Damning Evidence Of The U.S. Smuggling Syrian Oil

CNX Resources also posted better-than-expected results, and said that it would trim spending. CNX was the latest in a string of companies from Appalachia that said that low prices would force them to restrain activity. Investors welcomed this news – CNX saw its share price jump by 15 percent on Tuesday, which was also aided by a rise in natural gas prices.

“We like the downshift in [capital expenditures] and activity to generate more free cash flow in 2020 given the weak gas macro environment,” analysts from Tudor Pickering Holt & Co. said, referring to CNX’s decision to cut spending in the face of a down market.

Still, there are a lot of headwinds facing the oil industry. Standard Chartered tracks 84 separate publicly-listed oil and gas companies, and as of October 29, 10 had reported their results. Some of those included the oil majors. The combined US oil liquids output of the 10 companies is 1.4 mb/d, so it offers some clues into the performance of the sector.

“Only two of the 10 companies increased oil liquids output [quarter-on-quarter] in Q3,” Standard Chartered said. “Their combined oil liquids output fell 4.7% q/q, almost completely offsetting their Q2 q/q growth. We expect the result from the full sample to be a bit better than the early reporters, but we expect the tone to remain downbeat.”

Spending cuts and reductions in drilling activity are becoming more apparent. The rig count fell by 21 last week, a rather substantial drop. The rig count has declined for 11 straight months, which suggests that U.S. shale may have trouble continuing to grow with WTI in the low- to mid-$50s.

Related: Tesla’s Tipping Point: Breaking Into China

“Some of the major companies are likely to put on a brave face about short-term conditions in the Permian Basin, although we think such a view would fly in the face of regional economic and activity measures, as well as reports from specialist shale oil and gas operators.”

Frac sand producer U.S. Silica saw its share price crater by more than 35 percent on Tuesday after it reported dismal results for the third quarter. Prices for frac sand were lower than expected in the period, a casualty of the broader slowdown afflicting the shale industry and oversupply from sand miners. Fewer fracked wells means less need for sand. “Energy markets deteriorated further and faster than expected during the quarter as E&P budget exhaustion slowed completion activity, resulting in lower demand and pricing pressure,” Chief Executive Officer Bryan Shinn said on an earnings call.

U.S. Silica sees demand for frac sand declining by another 10 percent in the fourth quarter before rebounding in 2020.

Many more earnings results will be announced in the next week and a half as shareholders wait anxiously.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play