35 minsEU Embargo On Russian Oil Products Enters Into Effect
2 hoursGoldman Sachs Warns Of An Imminent Oil Supply Shortage
2 daysIran To Help Venezuela Overhaul Major Refinery Complex
3 daysEU Supports $100 Russian Diesel Price Cap
3 daysOil Prices Crash After Perky Jobs Data
3 daysEU Leaders Meet In Ukraine To Discuss Fresh Sanctions Package
3 daysRussia’s Oil And Gas Revenues Slump 46% Year-Over-Year
3 daysEurope’s Gas Prices Set For 6% Weekly Gain As Cold Weather Closes In
3 daysGermany Failed To Hit Its Gas Consumption Target In January
3 daysRussia Sees No Reason To Cut Its Oil Product Output
3 daysRussia Considers Brent-Based Oil Tax To Limit Its Losses
3 daysU.S. Refiners To Scale Back Capacity Utilization After Record 2022
3 daysTesla May Have To Reconsider Its Mexico Plant
3 daysFitch Expects $95 Oil In 2023
3 daysColorado Regulator Suspends Oil Company’s Ability To Operate Wells
4 daysNorway Says It Will Use Wartime Oil Profits To Aid Ukraine
4 daysSpain Boosts LNG Port Capabilities But Russian Gas Is In The Mix
4 daysEU President Promises 10th Round Of Sanctions On Russia
4 daysMorgan Stanley: Expect More EV Price Cuts Ahead
4 daysAsia’s Oil Imports Hit Record High Despite Drop In Chinese Demand
4 daysOPEC’s Oil Production Drops In January As Saudi Arabia Cuts Output
4 daysTurkey: Oil Product Tankers Must Have Insurance From February 6
4 daysEU Launches LNG Reference Price For Its Gas Market Correction Mechanism
4 daysShell Reports Record Earnings As Profits Double
4 daysU.S. LNG Exports Drop As Domestic Demand Climbs
4 daysActivists Attempt To Derail An $8 Billion Alaskan Oil Project
4 daysU.S. Pipeline Operator Predicts A Big Year For The Permian Basin
4 daysOil Prices Climb On OPEC+ Decision And Declining Dollar
4 daysU.S. Monthly Crude Oil Production Falls
4 days4 Days from Deadline, EU Fails To Agree On Russian Oil Products Price Cap
4 daysGold Demand Soars To Hit 11-Year High In 2022
5 daysGermany’s Largest Gas Storage Facility Can’t Store Gas
5 daysU.S. Manufacturing PMI Hits Lowest Since May 2020
5 daysIran And Russia Integrate Banking Systems To Skirt SWIFT Sanctions
5 daysUK Food Inflation Is Out Of Control
5 daysOil Pipeline From Russia To Europe Remains Operational Despite Shelling
5 daysRussia’s Economy Shrinks 2.7% Due To Western Sanctions
5 daysRussian Urals Traded At $49.48 in January, But The Kremlin Isn’t Worried
5 daysGoldman: The Fed Is Approaching A “Critical Inflection Point”
5 daysDisappointing Returns May Force BP To Rein In Its Renewable Energy Push
4 minutesEnergy Armageddon
6 minutesHow Far Have We Really Gotten With Alternative Energy
10 minutesRussia Says Europe Will Struggle To Replace Its Oil Products
6 hoursGREEN NEW DEAL = BLIZZARD OF LIES
2 minsReality catching up with EV forecasts
11 days"Natural Gas Price Fundamental Daily Forecast – Grinding Toward Summer Highs Despite Huge Short Interest" by James Hyerczyk & REUTERS on NatGas
8 hoursFamous author Michael Crichton talks about the "Climate Change Religion" aka Feudalism 2.0
5 days87,000 new IRS agents, higher taxes, and a massive green energy slush fund... "Here Are The Winners And Losers In The 'Inflation Reduction Act'"-ZeroHedge
10 daysA Somewhat Realistic View of the Near Future for Electric Vehicles Worldwide
Exxon Mobil and Chevron released fourth quarter earnings this morning, and the market cheered. After a period of misses, this morning’s release was the second consecutive beat of expectations for EPS by Exxon, confirming that Q3 wasn’t just a flash in the pan. Chevron also built on last quarter’s good results. That is welcome news for both companies, but if you dig a little deeper into the numbers and accompanying comments there are some interesting things that can be learned that go beyond the company-specific.
ADVERTISEMENT
(Click to enlarge)
Obviously, EPS of $1.41 versus expectations for $1.08 at XOM were significant, but it came on revenue of $71.89 billion that was just below the consensus estimate for $72.4 billion. CVX missed expectations slightly on EPS, and also missed on revenue. That suggests that the main story here was one of increased profitability at Exxon, not an industry-wide improvement in market conditions. Investors should therefore avoid extrapolating long-term good news for other big oil companies and the energy sector in general. In fact, some of the details of the Exxon beat actually suggest that the opposite may be true.
ADVERTISEMENT
They reported a four percent increase in oil production, an increase largely down to increased activity in the Permian Basin. About one third of U.S. crude now comes from that region and, based on other details given by Exxon’s CEO Darren Woods…
Exxon Mobil and Chevron released fourth quarter earnings this morning, and the market cheered. After a period of misses, this morning’s release was the second consecutive beat of expectations for EPS by Exxon, confirming that Q3 wasn’t just a flash in the pan. Chevron also built on last quarter’s good results. That is welcome news for both companies, but if you dig a little deeper into the numbers and accompanying comments there are some interesting things that can be learned that go beyond the company-specific.
ADVERTISEMENT
(Click to enlarge)
Obviously, EPS of $1.41 versus expectations for $1.08 at XOM were significant, but it came on revenue of $71.89 billion that was just below the consensus estimate for $72.4 billion. CVX missed expectations slightly on EPS, and also missed on revenue. That suggests that the main story here was one of increased profitability at Exxon, not an industry-wide improvement in market conditions. Investors should therefore avoid extrapolating long-term good news for other big oil companies and the energy sector in general. In fact, some of the details of the Exxon beat actually suggest that the opposite may be true.
ADVERTISEMENT
They reported a four percent increase in oil production, an increase largely down to increased activity in the Permian Basin. About one third of U.S. crude now comes from that region and, based on other details given by Exxon’s CEO Darren Woods in a post-earnings interview on CNBC, the cost of recovery there seems to be falling. Woods said that he believed that XOM could be profitable with oil in the $35-40 range.
Again, that is great news for Exxon, but after a period of global supply of oil outstripping demand, it suggests that the normal market adjustment to supply as prices fall may be being distorted somewhat. There is a general feeling that, with crude bouncing sharply off its lows at the end of December, the future is a bit brighter for energy stocks following a long period of underperformance. If crude’s recovery costs are falling across the board, however, supply will be less sensitive to price drops and will continue to increase regardless of demand.
If that is the case, then investors should be careful not to draw broad conclusions from XOM’s success and the market’s positive reaction to what was essentially a “so-so” report from Chevron. It suggests that the upside for crude will be limited, and that oil will remain vulnerable to any fluctuations in the market’s expectations for global growth.
For traders and investors with a shorter time horizon though, the relative success of both the big companies, or more importantly the market’s willingness to focus on the good news in both reports, does indicate a trade that may be worth taking. Some of the smaller, U.S. focused E&P companies that have yet to report, such as Apache (APA) and Concho (CXO) will presumably benefit from the same conditions in Q4, so buying them in front of earnings makes sense. If you do that, however, the implications for the price of oil in the coming months mean that it should be seen as a short-term play rather than a long-term investment.
All in all, while the market reacted positively to both Exxon and Chevron’s earnings, they are not indicative of a sustained resurgence in energy. They contain information that suggests that some of the longer-term issues facing the sector remain, so while there will be lots of opportunity for trading oil stocks, taking profits when they come still looks like the best strategy.