Higher prices, production surge lift oil majors second quarter earnings

Oil majors, Shell, ExxonMobil, Eni, Total and Chevron have reported improved second quarter earnings arising chiefly from ramping up crude oil production and higher oil prices, BusinessDay analysis has shown.

Italian oil major Eni, said its oil and gas production rose 5.2% on the year to 1.86 million boe/d in the quarter, due to improve production at the giant Zohr gas field off Egypt and helped by new fields in Indonesia, Congo and Ghana. Higher production at the giant Kashagan project in Kazakhstan and the Val d’Agri fields in southern Italy also contributed to volume addition.

Eni says it expects an average 4% production growth to about 1.9 million boe/d this year, assuming a Brent price scenario of $60/b.

“Eni recorded another period of strong profitability in the second quarter,” CEO Claudio Descalzi said in a statement. “Our cash generation also grew significantly, driven by the price of Brent and increased production levels.”

French energy giant Total also saw earnings jump by 44 per cent in the second quarter as higher oil prices and record production boosted earnings. Production rose to 8.7 per cent year-on-year to 2.7m barrels of oil equivalent per day, led by the acquisition of Maersk Oil and higher than expected volumes from the Yamal liquefied natural gas project in Russia.

The company’s performance was also helped by higher oil price that averaged $74 a barrel in the quarter. This helped boost cash flows to $6.8bn, up by 20 per cent on the previous quarter. Adjusted net income jumped to $3.6bn from $2.5bn in the same period a year ago

Patrick Pouyanne, CEO said that despite rising oil prices the company was continuing with a strategy of drilling down costs, with the company’s break-even level before dividends dropping below $25 a barrel.

“Discipline on spending is resolutely maintained,” Pouyanne said.

Europe’s biggest oil company, Shell reported that while its oil and gas production during se second quarter of 2018 was 1.5% lower year on year at 3.44 million b/d of oil equivalent but its upstream output was 5.4% higher than a year-ago excluding acquisitions and divestments.

Shell saw higher prices offset lower output to lift its earnings in second quarter, announcing the restart of a multi-billion dollar share buyback program as its confidence in oil and gas sector recovery grows.

Shell, which failed to grow its production last year, said, however, that its upstream output was 5.4% higher than a year-ago excluding acquisitions and divestments.

As for Chevron, its upstream exploration and production business was the chief driver, doubling net income to $3.4bn from the same period last year. This lifted earnings per share to $1.78 per share from 77 cents in the same period last year, when net income was just $1.5bn.

The company’s production growth slowed to just 2 per cent to 2.83m barrels of oil equivalent per day, after jumping 6 per cent in the first quarter. Refining earnings slipped primarily in the US company’s international operations, with the downstream division earning $181m overseas compared to $561m in the same period a year ago

ExxonMobil reported earnings of $4 billion, or $0.92 a share, that missed analysts’ estimate of $1.24 a share as the ongoing rebound in crude prices bolstered its business producing oil and gas.

While profits missed projections, revenue beat market expectations. Total revenue and other income during Q2 came in at $73.5 billion versus the estimated $72.58 billion.

“Second quarter results were primarily impacted by significant scheduled maintenance undertaken to support operational integrity,” said Darren Woods, the company’s CEO.

Exxon’s total oil and gas production fell by 7 percent from a year ago which it attributed to falling natural gas output from downtime in Qatar and Australia, as well as in Papua New Guinea, where an earthquake disrupted the company’s liquefied natural gas operations.

ISAAC ANYAOGU