Oil & Gas Stock Roundup: CVX & RDS.A Earnings Impress, XOM & TOT Disappoint

It was a week where oil prices ended modestly down but natural gas futures tilted higher.

On the news front, U.S.-based integrated major Chevron Corporation CVX and European counterpart Royal Dutch Shell plc RDS.A reported strong numbers, helped by rebounding commodity prices. However, world's largest publicly traded oil company Exxon Mobil Corporation XOM and France-based TOTAL S.A. TOT came up with weaker-than-expected earnings reports despite higher oil realizations.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures edged down 0.4% to close at $68.10 per barrel, natural gas prices gained about 1.2% to $2.771 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger & Halliburton's Q1, TOTAL's Acquisition & More)

The oil benchmark was little changed as the upside from the possibility of United States re-imposing sanctions on Iran was more than offset by bearish EIA crude inventory numbers.

Of late, crude prices have been supported by indications that the Trump administration might lead America's exit from the landmark Iran nuclear deal if the European allies do not agree to toughen the terms by May 12. The return of sanctions would put pressure on OPEC’s third-largest oil producer’s energy industry and reduce global supply.

But the Iran-induced gains were overshadowed by the Energy Department's inventory release, which revealed a surprise weekly build in crude stockpiles. A rise in the oil drilling rig count – pointing to an increase in domestic output – also played spoilsport.

Meanwhile, natural gas prices moved northward last week following a larger-than-expected decrease in supplies. Investors were encouraged by another unseasonal inventory drawdown that further pushed back the commencement of the injection season.

Recap of the Week’s Most Important Stories

1.    Energy giant Exxon Mobil posted lower-than-expected earnings in first-quarter 2018, thanks to plunge in oil equivalent production, decreased refinery throughput and lower margins at the chemical business. This was partially offset by increased price realizations from liquids. To be precise, the company reported earnings of $1.09 per share, which missed the Zacks Consensus Estimate of $1.14.

Days before the earnings release, Exxon Mobil board of directors approved a hike in the quarterly dividend. The second-quarter 2018 dividend was 82 cents per share, higher than 77 cents in the first quarter.

Production averaged 3.889 million barrels of oil-equivalent per day (MMBOE/d), lower than 4.151 MMBOE/d in the year-ago quarter. Liquid production fell year over year to 2.216 million barrels per day. Moreover, natural gas production was 10.038 MMCF/d (millions of cubic feet per day), down from 10.908 MMCF/d in the year-ago quarter.

During the quarter under review, Exxon Mobil generated cash flow of $9.9 billion from operations and asset divestments, marking the highest level since 2014. The energy giant returned $3.3 billion to shareholders through dividends. Capital and exploration spending rose roughly 17% year over year to almost $4.9 billion. (Read more Exxon Mobil Falls on Q1 Earnings Miss, Beats on Sales)

2.    Smaller rival Chevron saw its shares rise almost 2% on Friday after reporting stronger-than-expected first-quarter earnings amid the recovery in oil prices and production gains. The company reported earnings per share of $1.90, significantly ahead of the Zacks Consensus Estimate of $1.45.

Quarterly revenues of $37,764 million lagged the Zacks Consensus Estimate of $38,737 on refining weakness but was up 13% year over year.

Chevron’s total production of crude oil and natural gas increased 6.6% compared with last year’s corresponding period to 2,852 thousand oil-equivalent barrels per day (MBOE/d). The U.S. output rose 9.1% year over year to 733 MBOE/d but the company’s international operations (accounting for 74% of the total) was up 5.7% to 2,119 MBOE/d.

Importantly, Chevron delivered a good cash flow performance this quarter – an important gauge for the oil and gas industry – with $5,043 million in cash flow from operations, up from $3,777 million a year ago.(Read more Chevron Shares Gain After Posting Big Q1 Earnings Beat)

3.    Europe’s largest oil company Royal Dutch Shell reported strong first-quarter results as rebounding commodity prices and continued improvement of its integrated gas unit helped the company in coming out with better-than-expected numbers.

The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of $1.28, going past the Zacks Consensus Estimate of $1.24. Revenues of $91,114 million also beat the Zacks Consensus Estimate of $81,020 million.

During the quarter under review, Zacks Rank #3 (Hold) Shell generated cash flow from operations of $9,427 million, returned $4,000 million to shareholders through dividends and spent $5,183 million on capital projects. Despite falling marginally from the year-ago period, the company’s resilient cash generation has helped it to cover cash dividend payments and interest. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shell has already aborted its two-and-a half-year long scrip dividend program as cost-containment efforts and divestment strategies have paid off. Importantly, the group raked in $5,178 million in free cash flow during the first quarter. (Read more Shell's Q1 Earnings Jump on Higher Commodity Prices)

4.    French supermajor TOTAL S.A. reported first-quarter 2018 operating earnings of $1.09 per share (€0.89 per share), lagging the Zacks Consensus Estimate of $1.12 by 2.7%. The bottom line improved 8% from the year-ago figure of $1.01 (€0.95 per share). This was due to solid operational performance, steadily decreasing manufacturing costs and new project ramp ups, boosting production.

Total hydrocarbon production during the first quarter averaged a record 2,703 thousand barrels of oil equivalent per day, up 5% year over year. The increase was due to higher contribution from Kashagan, Moho Nord, Fort Hills, Edradour-Glenlivet and Yamal LNG, partially offset by natural field decline and PSC price effect. Improved security condition in Libya and Nigeria also boosted production.

Cash and cash equivalents as of Mar 31, 2018 were $30.09 billion, compared with $27.52 billion as of Mar 31, 2017. Net debt-to-equity ratio was 15.1% at the end of the quarter, down from 18.1% at the end of first-quarter 2017.

Cost-reduction initiatives have resulted in cost savings of $3.7 billion in 2017 and the company aims to save more than $4 billion in 2018. TOTAL’s upstream production is expected to increase 6% in 2018, in sync with its objective to grow 5% per year on an average between 2016 and 2020. (Read more TOTAL Q1 Earnings Miss, Production at Record High)

5.    Upstream energy player ConocoPhillips COP reported first-quarter 2018 adjusted earnings of 96 cents per share, beating the Zacks Consensus Estimate of 74 cents. Revenues of $8,961 million steered past the Zacks Consensus Estimate of $8,680 million. The strong first-quarter results were supported by higher oil and natural gas price realizations.

Production from continuing operations averaged 1,269 thousand barrels of oil equivalent per day (MBOED) in the quarter, lower than 1,593 MBOED in the year-ago quarter. The decline was led by divestment of assets and decline of field.

As of Mar 31, 2018, the company had total cash and cash equivalents of $5.2 billion and debt of $17.1 billion, with a debt-to-capitalization ratio of 36%. In the reported quarter, ConocoPhillips generated $2.4 billion in cash from operating activities. Capital expenditures and investments totaled $1.5 billion and dividends payments grossed $338 million.

ConocoPhillips reiterated its 2018 capital spending at $5.5 billion. For the April-to-June quarter of this year, the company projects production in the range of 1,170-1,210 MBOED. For 2018, the company’s production projection was raised from 1,195 -1,235 MBOED to 1,200-1,240 MBOED.(Read more ConocoPhillips Beats on Q1 Earnings, Lifts Output View)

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	-1.5%	-7.3%
CVX	+3.5%	+8%
COP	-1.3%	+24.8%
OXY	+0.7%	+13.8%
SLB	-0.2%	+8.4%
RIG	+0.6%	+18%
VLO	+1.1%	+37.4%
ANDV	+3.9%	+26.7%

Contrary to the week’s mildly negative oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – generated a +0.7% return last week. The best performer was downstream operator Andeavor ANDV whose stock jumped 3.9%.

Longer-term, over six months, the sector tracker is up 7.5%. Another independent refiner,Valero Energy Corporation VLO, is far and away the major gainer during this period, experiencing a 37.4% price fall.

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.

However, the 2018 Q1 earnings again remain the primary focus this week, with a number of S&P 500 members coming out with quarterly results.

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Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
TOTAL S.A. (TOT) : Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Tesoro Corporation (ANDV) : Free Stock Analysis Report
 
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