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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Trading Profits Save Oil Majors In Very Volatile Second Quarter

In a big day for earnings releases, European majors Shell and Total reported on Thursday surprise profits for the second quarter, thanks to strong oil trading business when prices were highly volatile.  

Royal Dutch Shell (NYSE: RDS.A) reported adjusted earnings of US$638 million, a whopping 82-percent plunge compared to the earnings for the second quarter of 2019, but well above analyst expectations for a loss, thanks to “very strong crude and oil products trading.”

On a current cost of supplies (CCS) basis – Shell’s proxy for net profit – the group reported a loss of US$18.377 billion attributable to shareholders, due to an impairment charge of US$16.8 billion post-tax as it revised its price assumptions and the market fundamentals. The charge was at the lower end of the range that Shell provided a month ago.

France’s Total (NYSE: TOT) also booked an adjusted profit for the second quarter, of US$126 million, down by a massive 96 percent from Q2 2019, but again beating forecasts because of strong oil trading performance.

“These results are driven in particular by the outperformance of trading activities, once again demonstrating the relevance of Total’s integrated model,” Total’s CEO Patrick Pouyanné said.

Despite the dramatic fall in earnings and an impairment charge of US$8.1 billion, mostly in Canada’s oil sands, Total kept its dividend intact.

Italy’s Eni (NYSE: E), however, wasn’t spared a brutal second quarter, and reported a loss, further cut capex and operating costs, and changed its dividend policy tying it to the price of Brent and cut the dividend.

“The dividend will no longer be a fixed amount, in an environment increasingly subject to high variability,” CEO Claudio Descalzi said.

Eni also took an impairment charge, like it warned earlier this month. Shares in Eni crashed as much as 7 percent pre-market in New York on Thursday.

Across the Atlantic, ConocoPhillips (NYSE: COP) reported Q2 earnings of US$300 million, down from US$1.6 billion for the same period last year, and below analyst expectations. The performance in Q2 2020 was attributable to “weak realized prices, coupled with our rational economic action to curtail production in favor of expected higher future prices,” chairman and CEO Ryan Lance said.

Canada’s Husky Energy (TSE: HSE) swung to a loss of US$226 million (C$304 million) for the second quarter, compared to net earnings of US$275 million (C$370 million) for Q2 2019 due to the demand crash and production curtailments.

By Tsvetana Paraskova for Oilprice.com

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