The oil majors began reporting their third quarter earnings in recent days, and the figures do not look good. The three-month period ending in September saw oil prices sink to the low $40s per barrel and rebound to $50, but the losses continued to pile up for many of the largest oil companies.
Statoil started the earnings season on Thursday, reporting a loss much worse than analysts had expected. The quasi-state-owned Norwegian firm
French oil giant Total
But some of the others did not fare as well. Italian oil company Eni
ConocoPhillips reported a $1 billion loss for the quarter, or about 84 cents per share, and revenue declined by 13 percent to $6.52 billion. Still, the company raised its production estimate for the year slightly, and its loss was not quite as bad as analysts expected.
There are some common themes throughout these earnings reports. First, obviously, earnings continue to suffer. Not only are oil prices still low, albeit up slightly from the lows earlier this year, but the oil majors are struggling to grow production. Severe cutbacks in spending, along with large asset sales over the past two years, are making it difficult to stop production from falling. Exxon saw output decline 3 percent over the past 12 months; Chevron’s was down 1 percent; a few others were flat or slightly up.
A second trend that emerged was declining earnings from refining, which makes sense because refining margins across the globe have plunged this year. Global refining margins were down 42 percent in the third quarter from a year earlier,
Third, debt levels continue to rise. Exxon saw its total debt balloon by nearly 35 percent to $46.2 billion by the end of September. Chevron’s debt jumped by 27 percent to $45 billion. Debt for ConocoPhillips rose by 15 percent to $28.7 billion. These are worrying figures, and to the extent that some of the other majors managed to avoid rising debt or even whittled away at their indebtedness, it was because they sold off assets, providing one-time cash injections that could reduce long-term production.
Meanwhile, they are all stubbornly holding onto their dividend payout levels, a generous offering to shareholders when they are struggling to get out of negative territory. With high dividends and inadequate cash to cover those payouts and fund capex, debt is rising (see previous paragraph).
One final note. This could all be cyclical, but ExxonMobil offered a
By Nick Cunningham for Oilprice.com
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