The earnings reports for the oil majors are widely expected to reveal sharp improvement for the oil industry, finally rebounding after more than three years of low prices. And it could get even better going forward, with oil prices seemingly safe from sub-$50 territory.
“Because the price of oil started so low in the third quarter and gradually increased throughout the quarter, we’re really not expecting to see that flow through to earnings this quarter. It will likely be next quarter,” Mark Tepper, president and CEO of Strategic Wealth Partners, told CNBC.
“We do feel the tide has certainly turned, and overall, the landscape for the energy sector in general looks to be positive. So we’re looking at these earnings reports for Exxon and Chevron to really confirm that optimism,” he added.
Ahead of the quarterly earnings reports from the oil majors, the five largest companies are expected to generate a combined $34 billion in cash in the third quarter, according to Jefferies data cited by Bloomberg.
Chevron reported a profit of $2 billion in the third quarter, an increase of more than 50 percent from the $1.3 billion earnings from the third quarter in 2016. That included one-off proceeds from a $675 million asset sale plus a write-down of $220 million.
ExxonMobil also posted a solid quarter, earning $4 billion, up nearly 50 percent from the $2.7 billion earned a year ago.
“A 50 percent increase in earnings through solid business performance and higher commodity prices is a step forward in our plan to grow profitability,” Exxon CEO Darren Woods said in a statement.
Exxon took a $160 million hit in the quarter, or 4 cents per share, from the damage related to Hurricane Harvey. Overall, Exxon’s cash flow has outpaced capex and dividends for the fourth consecutive quarter.
Total SA posted the strongest earnings in more two years, reporting a $2.7 billion profit, a 29 per cent increase from a year earlier.
ConocoPhillips has had a tougher time over the past few quarters, but it reported improved figures on Friday: net earnings of $0.4 billion in the third quarter, up substantially from the $1 billion loss a year ago. Production was up by 1.4 per cent and so far this year the company’s cash flow has exceeded capital and dividends, a positive sign for the company.
However, with oil prices firming up since then, and more importantly, the oil majors cutting spending and rightsizing the ship for $50 oil, they’ve created smoother waters.
Overall, the oil majors seemed to have successfully lowered their breakeven prices to around $50 per barrel.