Numerous oil company earnings will be released this week, and it could be the most dismal set of oil earnings of 2015.
Crude oil prices just had their worst quarter of 2015. WTI oil fell 25% in the third quarter, while Brent oil dropped 25.4%.
With prices at eight-year lows and production at 80-year highs, U.S. oil companies are struggling to achieve profitability and float expensive drilling projects.
But Big Oil corporations will start to thrive in the low price environment as they continue to take over small energy firms. Recent deals like Energy Transfer Equity LP’s (NYSE: ETE) $32.6 billion takeover of Williams Companies Inc. (NYSE: WMB) show how M&A activity will make the market a lot leaner moving into 2016.
That’s why this week’s round of earnings are so important. They will indicate whether these oil firms are raking in enough cash to make a huge acquisition down the road.
“We will see a restructuring of assets throughout the upstream (production) to midstream (transport and soon export) to downstream (refining and distribution) process,” Money Morning Global Energy Strategist Dr. Kent Moors said. “All of these will hand us some very nice investment opportunities.”
Here are the four biggest oil company earnings reports to focus on this week…
Four Oil Company Earnings Reports to Watch This Week
Oil Company Earnings to Watch, No. 1: BP Plc. (NYSE ADR: BP) stock plunged 23.5% between July and September. The British oil titan’s market performance suggests another disappointing earnings report as the firm suffers from declining U.S. rig count and soft demand in China.
The company is still recovering from the Deepwater Horizon oil spill it caused in 2010. During the second quarter, BP paid $9.8 billion in costs for the spill. On Oct. 6, the firm announced it would pay a $20.8 billion settlement resolving all claims against BP charged by the U.S. Department of Justice. It’s considered the largest settlement with a single company in U.S. history.
In Q2, BP posted a profit of $1.3 billion, down 63.9% from the year-ago quarter. The company will release its Q3 earnings report after the closing bell on Tuesday, Oct. 27.
Here are three more oil company earnings reports to keep an eye on this week…
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Oil Company Earnings to Watch, No. 2: Exxon Mobil Corp. (NYSE: XOM) is expected to stack up more losses in its third-quarter report. Thomson Reuters projects earnings of $0.91 per share – a 50% decline from $1.82 a year ago. Meanwhile, energy investment firm Oppenheimer forecasts an EPS of $0.81.
However, shares of the largest U.S. oil company performed better than other major U.S. firms. XOM stock fell 10.6%, compared to Chevron Corp.’s (NYSE: CVX) 18.2% decline and ConocoPhillips’ (NYSE: COP) 21.9% decline.
During the second quarter, Exxon reported a profit of $4.2 billion, a 52% decline from $8.8 billion a year earlier. The supermajor will report earnings before market open on Friday, Oct. 30.
Oil Company Earnings to Watch, No. 3: Royal Dutch Shell Plc. (NYSE ADR: RDS.A) stock tumbled 16.9% in Q3 and erased bullish momentum after announcing the largest energy merger in more than 10 years.
On April 8, Shell agreed to buy BG Group Plc. (OTCMKTS ADR: BRGYY) for $70 billion. It became the biggest energy acquisition in over a decade and formed the world’s largest producer of liquefied natural gas (LNG). However, antitrust fees from the deal likely lowered Shell’s third-quarter profit after the firm received EU antitrust approval last month.
Shell is also recovering from a failed drilling program in the Alaskan Arctic. Last month, the company announced it would cease drilling operations in the Chukchi Sea. The withdrawal could result in a $4 billion write-off in the company’s value.
Shell reported earnings of $3.4 billion, or $1.22 per share, in the second quarter. That’s down from $5.1 billion and $1.94 per share during the second quarter of 2014. Morgan Stanley (NYSE: MS) analysts expect Q3 EPS to come in at $0.77, down 37% from a year ago. Shell will release its earnings before the opening bell on Thursday, Oct. 29.
Oil Company Earnings to Watch, No. 4: Chevron Corp. (NYSE: CVX) stock cratered 18.2% between July and September. Although its market performance isn’t the worst among Big Oil firms, Chevron is expected to see the largest year-over-year earnings decline.
Thomson Reuters analysts predict the firm will report an EPS of $0.76 on revenue of $29.7 billion. That marks a 74% EPS drop and 46% revenue drop from the third quarter of 2014. Despite an overall drop, the brightest area of the report should be downstream operations. That sector’s revenue is expected to increase 40% to $1.6 billion from the year-ago quarter.
Chevron will release its Q3 financials before market open on Friday, Oct. 30.
Stay tuned to Money Morning for all of the biggest oil earnings updates. Follow us on Twitter at @moneymorning.
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