Earnings Reports

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Ahead this week major oil companies Royal Dutch Shell $RDSA, ExxonMobil $XOM, Chevron $CVX and ConocoPhillps $COP report Q417 earnings. With oil over $65 WTI and $70 Brent positive news is expected.

Oil Gas Sunset

Royal Dutch Shell $RDSA and ConocoPhillips $COP will lead off Thursday, ExxonMobil $XOM will report Friday with Chevron $CVX.

Guidance on exploration and production spending will be key as oil prices have picked up recently, with U.S. drilling and production have near record highs with oil service giants Haliburton $HAL, Schlumberger $SLB and Baker Hughes, a GE Co $BHGE all reported surging activity metrics.

What to expect from Royal Dutch Shell  Earnings

Shell consensus is a profit of $16 billion of profit in 2017 boosted by BG Group Plcs oil projects in Brazil and gas in Australia It has been a tough ride with the oil prices slide in 2014 the BGG price tag was excessive, forcing Shell to stretch it's borrowing, cut costs, sell assets and cut spending. It is worth noting that since those difficult times Shell’s B shares in London have returned more than five times Exxon’s.

UBS expects Shell to announce a 5% drop in production with upstream “held back” by two interruptions from the temporary shut-down of the Forties pipeline in the North Sea (which took 20,000 boepd offline for three weeks) and a fire on the Enchilada platform in the Gulf of Mexico (50-60,000 boepd) which is ongoing. The upstream decline will be partially offset by two new fields, Gorgon and Schiehallion, and expansion in Brazil. UBS forecasts group production at 3.7mln barrels oil equivalent per day. The analyst expects earnings to benefit from rising LNG contract prices, stronger ‘spot’ markets and trading activity.

What to expect from ConocoPhillips Earnings

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, LNG, and natural gas liquids (NGLs) worldwide.

Analysts expect Conoco's EPS up to 57 cents with revenue rising to $7.7 billion 

Consensus forecasts earnings at $2.10 per share for 2018, increase to $2.41 in 2019 and $3.56 in 2020.

Keep in mind production and sales numbers are difficult to foecast with the $COP divestures including the sale of the mining operations in Foster Creek Christina Lake oil sands and Western Canada’s Deep Basin gas assets. Conoco also closed the divesture deals of San Juan asset and Barnett asset in the third quarter of 2017.

Barclays raised its price target for ConocoPhillips $COP on October 10 to $55.00 from $51.00 while maintaining an Overweight rating, Analyst Paul Cheng noted a positive outlook on the U.S. Oil companies, both major integrated and independent refiners, as crude oil continues to maintain spot prices above $50, providing a catalyst for "some new legs" in the space. He sees Hurricane Harvey and Irma not having lasting effects.

Jefferies on October 18 rated  $COP a buy their price target was raised to $57 from $49. They noted Conoco’s portfolio includes resource-rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects. Many Wall Street analysts feel the company can accelerate growth from a reloaded portfolio depth in the Bakken and Eagle Ford, and with visibility on future growth from a sizable position in the Permian.

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What to expect from ExxonMobil's Earnings

Exxon Mobil Corporation principal business is energy exploration and production of, crude oil and natural gas; manufacture of petroleum products; and transportation and sale of crude oil, natural gas, and petroleum products, $XOM.operates as a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics; and various specialty products.

Analysts expect Exxon's EPS up 18% to $1.06 cents with revenue rising 23.4% to $75.31 billion.

Look for capex, cash and hurricane impact. Dividends are huge with oil majors, look at how General Electric $GE has collapsed further after cutting dividends. Exxon's capex budget is $22 billion for 2017, updates on this are key with oil recovering so far this year. $XOM  had $7 billion in operating cash flow in Q2. From this $3.3 billion went in dividend payments. 

Permian updates are what we want. After the huge acerage buys at the start of the year Exxon announced last quarter another 22,000 net acres in the Permian Basin since May split between the Midland Basin and the Delaware Basin. Guyana is another region we want to hear updates on. LNG and natural gas updates along with its massive polyethylene production expansion in Mont Belvieu are all areas to watch in this intergrated major.

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What to expect from Chevron's Earnings

Chevron Corp. is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. It has large exposure to the Permian and to LNG with the  Wheatstone Chevron LNG Facility production starting in Western Australia

Analysts expect EPS up 500% to $1.33 with revenue rising 11% to $38.74 billion

Jefferies on October 18 rated $CVX a buy their price target was raised to $137 from $120. They noted the Permian Basin remains a key source of capital flexibility, and it is a key issue behind their relative preference for Chevron versus some of the other majors. 

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Sources: MarketWatch, TradersCommunity, XOM, CVX, COP

From The TradersCommunity Research Desk

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