Oil majors take a win against falling oil prices

Two oil giants, The Buyside And The Sellside, Take Pride In Exxon Mobil’s Best September In 16 Years, SustainCERA Conference Speaks Out Against Arctic Drilling “This is a good step,” analyst Arjun Murti said…

Oil majors take a win against falling oil prices

Two oil giants,

The Buyside And The Sellside, Take Pride In Exxon Mobil’s Best September In 16 Years, SustainCERA Conference Speaks Out Against Arctic Drilling “This is a good step,” analyst Arjun Murti said Monday of Exxon’s dividend. “But Exxon has yet to sustainably grow profits in the current commodity price environment. We see growing capital spending and operational risk coming in the future.” Jeroen van der Veer, CEO of Royal Dutch Shell, announced the offshore explorer’s plans to shed $25 billion in assets through 2019, slashing dividend payouts for investors and saying the job had become too challenging. “For us in Shell, the key is keeping cash outflows at a sustainable level,” he said. “We believe we are in a better position to manage the volatility of the industry.” Meanwhile, analysts from RBC have concluded a meeting about its clients’ sentiment, with many calling the producers’ results and strategy positives. “We did not sound the alarm bell. The tone from our clients was cautiously positive, even though they highlighted the risk with no oil price volatility seen in years. That sentiment seemed to focus on oil production cost cuts, stronger capex discipline, lower cash from working capital, etc,” they wrote in a note. “Our view is more of a ‘wait and see’.”

(Catherine Lai/CNN) – In a turnaround that’s good for the industry, two of the world’s largest oil companies each reported solid third-quarter earnings on Monday and Wall Street gave a thumbs-up.

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Exxon Mobil topped analysts’ estimates, thanks in part to a 44% increase in production. And Chevron had a profitable quarter for the first time in more than a year, thanks to an uptick in refining results.

So it seemed like the coalitions were clearly in a good place.

But there’s more to the story, and it’s about more than just the oil majors. Investors are focusing on a lot more than just falling oil prices.

It was a win for companies like Exxon, but why? Energy producers like Exxon are investing billions in new projects, including more pipelines, more refineries and, like Chevron, more liquefied natural gas (LNG) projects that can help boost global exports.

Even these companies’ projects haven’t reduced their debt or returned them to profitability, something that makes the profits more important in this industry.

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After two years of red ink, and adding up billions more in interest payments, debt is piling up again.

So, it was encouraging to see a major debt cut at Texas-based oil company EOG Resources last week.

And executives from Halliburton, another major oil company, said in a conference call that they were also “optimistic” about taking on more debt, a move that could help lower interest payments, but would inevitably increase debt levels.

Those are just two examples of energy companies looking to borrow more to fund their growth plans.

And you won’t see those plans in Exxon’s report this week, since it expects to pay down debt during its first dividend cut in 18 years.

Instead, Exxon reported its best profit since 2007 on Monday.

The company said its oil and gas production grew 14% year-over-year in the third quarter and was at the highest level since the beginning of 2015.

The company said its third-quarter earnings were 17 cents per share, while the oil giant earned $3.25 per share in the same period last year.

Shares of Exxon jumped more than 3% on Monday as the stock market continued its strong performance. Chevron added about 2% and EOG increased about 6%.

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