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Oil & Gas Stock Roundup: Exxon, Chevron, Shell Earnings Beat

It was a week where oil prices hit two-month highs, while natural gas futures sank to their lowest finish since July.

On the news front, integrated majors ExxonMobil XOM, Chevron CVX and Royal Dutch Shell RDS.A reported fourth-quarter earnings that improved year over year and came above the Zacks Consensus Estimate.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained 2.9% to close at $55.26 per barrel, natural gas prices plunged 11% to $2.734 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Halliburton's Q4, Eni's ADNOC Deal & More)

The U.S. crude benchmark rose for the fourth time in five weeks as Washington’s export sanctions on oil-rich Venezuela threatens to disrupt supplies. Lower OPEC production rates and data showing drillers in the United States cutting oil rigs to their lowest since May 2018 also contributed to the gains.

Meanwhile, natural gas prices registered another steep weekly decline following a below-consensus decrease in supplies and warm weather conditions, which could impact the heating fuel’s demand.

Recap of the Week’s Most Important Stories

1.    Energy giant ExxonMobil reported strong fourth-quarter 2018 earnings despite weakness in crude prices. Robust downstream profits, owing to impressive margins from North American crude differentials, and ramped-up liquids production from the prolific Permian primarily supported the outperformances. To be precise, the company reported earnings of $1.51 per share, which beat the Zacks Consensus Estimate of $1.08.

Total production averaged 4.010 million barrels of oil-equivalent per day (MMBOE/d), marginally higher than 3.991 MMBOE/d a year ago. ExxonMobil’s downstream segment recorded profits of $2.7 billion, surged from $0.9 billion in the October-December quarter of 2017, thanks to strong margins from North American crude differentials.

During the quarter under review, ExxonMobil generated cash flow of $9.5 billion from operations and asset divestments, up from $8.8 billion in the year-ago quarter. The energy giant returned $3.5 billion to its shareholders through dividends. Capital and exploration spending were down 13% year over year to $7.8 billion. (Read more ExxonMobil's Q4 Earnings Beat on Downstream Strength)

2.    Smaller rival Chevronreported a comprehensive beat in the fourth quarter of 2018 on the back of higher revenues, record production and rising crude oil prices. Significantly lower net charges due to the absence of a tax outgo of $2.47 billion also aided overall results. The U.S. energy major reported earnings per share of $2.06, surpassing the Zacks Consensus Estimate of $1.87 and also significantly improving from the year-ago profit of 73 cents.

Importantly, Zacks Rank #3 (Hold) Chevron delivered a good cash flow performance— an important gauge for the oil and gas industry — with $9.1 billion in cash flow from operations during the quarter. Notably, cash flow in the full year of 2018 totaled $30.6 billion versus $20.3 billion in 2017.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On an encouraging note, the company maintained its dividend growth streak, marking the 32nd consecutive year of payout hike. The largest oil producer in the United States hiked its dividend by 7 cents per share, giving investors another reason to cheer. The company declared a dividend of $1.19 per share, payable on Mar 11, 2019 to its shareholders as of Feb 15, 2019. The integrated giant also repurchased shares worth $1 billion during the fourth quarter. (Read more Chevron Q4 Earnings Beat on Record Output, Dividend Up)

3.    Europe’s largest oil company Royal Dutch Shell plc reported strong fourth-quarter results on robust commodity prices and higher downstream earnings. The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of $1.38, above the Zacks Consensus Estimate of $1.30 and the year-ago profit of $1.04. Meanwhile, Shell will repurchase $2.5 billion worth of shares up to Apr 29 in the third instalment of its three-year $25 billion buyback program.

Apart from rising handsomely from the year-ago period, the company’s cash flow from operations soared 202% from the year-earlier level to $22 billion. Importantly, the group raked in $16.7 billion in free cash flow during the fourth quarter - sufficient enough to take care of both its $2.5 billion in share buybacks and its $3.9 billion dividend.

Shell, which delivered on its $30 billion divestment target for 2016-2018, expects first quarter 2019 upstream volumes to be 10,000-50,000 BOE/D lower year over year, mainly due to divestments and field declines. The company further add that production at its ‘Integrated Gas’ segment will likely fall by some 140,000-170,000 BOE/D, mainly attributable to asset sales and the transfer of certain operations into the ‘Upstream’ unit. (Read more Shell Q4 Earnings and Sales Beat, Cash Flow Soars)

4.    ConocoPhillips COP reported fourth-quarter 2018 adjusted earnings per share of $1.13, beating the Zacks Consensus Estimate of 99 cents and improving significantly from the year-ago 45 cents. The outperformance stems from higher oil realizations and strong volumes from the unconventional assets.

The production of oil and natural gas averaged 1,357 thousand barrels of oil equivalent per day (66% liquids), up 8% from last year and ahead of the Zacks Consensus Estimate of 1,298 thousand barrels of oil equivalent per day. Results were helped by growth in the company’s Big 3 unconventional assets (Eagle Ford, Bakken and Delaware). ConocoPhillips’ production for oil, natural gas liquids (NGLs) and bitumen was 893 thousand barrels per day, while natural gas output came in at 2,785 million cubic feet per day.

ConocoPhillips guided toward 2019 capital spending of $6.1 billion. For the January-to-March quarter of this year, the company projects production in the range of 1,290-1,330 thousand barrels of oil equivalent per day. However, production is likely to speed up in the second half of 2019 following which full year volume is expected to average between 1,300 thousand barrels of oil equivalent per day and 1,350 thousand barrels of oil equivalent per day. (Read more ConocoPhillips Q4 Earnings Beat on Oil Price, Output)

5.    Baker Hughes, a GE company BHGE reported fourth-quarter 2018 adjusted earnings of 26 cents per share, which missed the Zacks Consensus Estimate by a penny. However, the bottom line rose 71% year over year from 15 cents. The earnings miss was owing to lower contributions from Bently Nevada and Controls businesses. However, the year-over-year higher results were aided by increase in activities associated to pressure pumping, artificial lift and drilling.

Despite the quarterly earnings miss, the stock rallied almost 5% in pre-market trading as investors cheered the record quarterly order figure. Total orders from all business segments through fourth-quarter 2018 were around $6.9 billion, up 21% year over year. Oilfield Services and Turbomachinery & Process Solutions business units accounted for $3.1 billion and $2.1 billion orders, respectively.

Baker Hughes’ capital expenditure in the fourth quarter totaled $214 million. As of Dec 31, 2018, the company had approximately $3.7 billion in cash, cash equivalents and restricted cash as well as $6.3 billion in long-term debt, representing a debt-to-capitalization ratio of 17.1%. (Read more Baker Hughes Earnings Miss & Revenues Beat in Q4)

Price Performance

The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

+5.9%

-6.7%

CVX

+4.5%

-4.4%

COP

+2.5%

-2.5%

OXY

+2.3%

-17.7%

SLB

-1%

-32.2%

RIG

-2.6%

-31.3%

VLO

+3.7%

-26.2%

MPC

+2.2%

-17.5%

In line with the week’s positive oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – generated a +3.1% return last week. The best performer was integrated oil major ExxonMobil whose stock rose 5.9%.  

But longer-term, over six months, the sector tracker is down 13.9%. Oilfield service biggie Schlumberger SLB was the major loser during this period, experiencing a 32.2% price decline.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas -- one of the few solid indicators that comes out regularly. Energy traders will also be focusing on the Baker Hughes data on rig count and the 2018 Q4 earnings, with quite a few supermajors and S&P 500 members coming out with quarterly results.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Schlumberger Limited (SLB): Get Free Report
 
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