• 1 hour Mexico Says OPEC Has Not Approached It For Deal Extension
  • 3 hours New Video Game Targets Oil Infrastructure
  • 4 hours Shell Restarts Bonny Light Exports
  • 6 hours Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 12 hours Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 17 hours British Utility Companies Brace For Major Reforms
  • 21 hours Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 23 hours Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 24 hours Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 1 day OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 1 day London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 1 day Rosneft Signs $400M Deal With Kurdistan
  • 1 day Kinder Morgan Warns About Trans Mountain Delays
  • 1 day India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 2 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 2 days Russia, Saudis Team Up To Boost Fracking Tech
  • 2 days Conflicting News Spurs Doubt On Aramco IPO
  • 2 days Exxon Starts Production At New Refinery In Texas
  • 2 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 3 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 3 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 3 days China To Take 5% Of Rosneft’s Output In New Deal
  • 3 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 3 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 3 days VW Fails To Secure Critical Commodity For EVs
  • 3 days Enbridge Pipeline Expansion Finally Approved
  • 3 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 3 days OPEC Oil Deal Compliance Falls To 86%
  • 4 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 4 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 4 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 4 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 4 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 4 days Aramco Says No Plans To Shelve IPO
  • 7 days Trump Passes Iran Nuclear Deal Back to Congress
  • 7 days Texas Shutters More Coal-Fired Plants
  • 7 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 7 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 7 days Chevron Quits Australian Deepwater Oil Exploration
  • 7 days Europe Braces For End Of Iran Nuclear Deal

Refining Saves The Day For Exxon and Shell

Refining Saves The Day For Exxon and Shell

The low oil prices that have been dogging the energy industry led to dramatically lower quarterly earnings for Royal Dutch Shell and Exxon Mobil, but the two giant companies did better than analysts had expected.

Related: Key Signals That Oil Prices Are On The Up

Profits for Shell, Europe’s largest oil company, amounted to $3.2 billion, adjusted for inventory changes and one-time benefits, during the first quarter of 2015. This was 56 percent lower than its earnings in the same period in 2014, the company reported April 30.

On the same day, Exxon, the largest US oil company, said it earned $4.94 billion in the first quarter of this year, down from 9.1 billion a year earlier, a 46 percent drop. It was the weakest first quarter for the oil giant since 2009.

The cause of the declines for both companies was simple: The average global cost of crude oil has plunged by nearly half since late June 2014, bringing with it the price of gas.

Related: We Are Witnessing A Fundamental Change In The Oil Sector

But both Shell and Exxon outperformed analysts’ expectations for the same reason: There was higher global demand for more affordable oil and increased earnings from refining, which became more profitable because the oil needed for the process was less expensive.

“Refining saved the day for Big Oil,” Fadel Gheit, a senior oil company analyst at Oppenheimer & Company in New York, told The New York Times.

While both companies beat analysts’ expectations – Exxon did well enough to increase its dividend by 5.8 percent to 73 cents per share this week – Shell fared somewhat worse. It reported a 53 percent drop in earnings from production to $2.54 billion overall, and lost $1.1 billion on several projects in the Americas.

Making matters worse, it produced an average of only 3.17 million barrels of oil equivalent per day in the first quarter of this year, down by 2 percent from the same period in 2014. Two other European oil giants, Total of France and Britain’s BP, had significant increases in the first quarter.

Related: Low Oil Prices Could Destabilize Financial System

Shell CEO Ben van Beurden issued a statement that the company is addressing these issues “in what is clearly a difficult industry environment.” He said Shell is “redoubling our efforts to drive a sharper focus on the bottom line.”

In fact, the drive for greater production is a chief reason for Shell’s plans to buy the British energy company BG Group. Shell says it expects the merger will translate into a 20 percent increase in production once the sale closes in early 2016.

While all energy companies have been cutting costs to cope with low oil prices, Exxon’s efforts evidently have paid off better than others’. Last month it said it would reduce capital spending to $34 billion, a reduction of fully 12 percent. This reflects what Exxon CEO Rex Tillerson said at a Houston conference on April 21, that he expects low oil prices are “going to be with us for a while.”

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News