Energy stocks have largely been out of favor for several years now. A global glut of oil and gas supply sent energy stocks reeling. The situation went from bad to worse because of demand destruction due to the COVID-19 pandemic.
(Bloomberg) -- Petrobras is pledging a 25% cut in carbon emissions by 2030, but that hasn’t stopped Chief Executive Officer Roberto Castello Branco from dismissing pledges by peers to completely neutralize their carbon footprints two decades later.“That’s like a fad, to make promises for 2050. It’s like a magical year,” the head of Brazil’s state-controlled oil giant said in an interview. “On this side of the Atlantic we have a different view of climate change.”His stance more or less echoes those of U.S. oil giants Exxon Mobil Corp. and Chevron Corp., which have emission reduction plans but have been outspoken about their focus on crude. Shale explorer Occidental Petroleum Corp. recently became the first large American oil producer to aim for net zero emissions from everything it extracts and sells by 2050. Royal Dutch Shell Plc, BP Plc and other major European producers were the first to make similar pledges.Even though Petrobras’s goal of a 25% cut is more modest, it still underscores the growing importance of environment, social and governance, or ESG, to investors and the general public.For a look at how Petrobras ranks on ESG, click herePetrobras’s climate policy focuses on “tangible” steps to reduce the amount of pollution caused by extracting, transporting and refining oil, Castello Branco said. The Rio de Janeiro-based company recently set up a management team dedicated to climate change. But, much like Exxon and Chevron, it’s steering clear of renewable energy businesses where it has little expertise and is unlikely to make much money.Brazil‘s government has come under intense criticism for not doing enough to combat record forest fires in the Amazon and encouraging settlement. When confronted with skepticism on Petrobras’s own environmental policies, Castello Branco said he responds with facts and figures, such as a 70% reduction in emissions from Petrobras’s new line of soy-based diesel.Petrobras is also expanding at its most prolific oil fields that produce a lighter and less contaminating grade of crude than the legacy fields it’s selling off. The idea is to produce only the most profitable barrels, not the growth at all cost model seen during previous oil booms, Castello Branco said.Peak OilTalk of oil consumption peaking anytime soon is premature, and could be just as wrong as adherents to Peak Oil theory who a decade ago thought the fossil fuel was running out, the CEO said.“I believe oil will be in demand for a long period of time. It is still the backbone of modern society,” he said. “This subject of peak demand is similar to what we heard in the past about peak supply. We don’t know.”Petrobras was able to weather the depressed oil market in 2020 thanks to strong Chinese demand for Petrobras’s most dominant grades from deep-water fields. It is introducing oil from the giant Buzios field to China, and its exports will increase more if it’s successful at selling eight domestic refineries.Castello Branco said four of the refineries are in the final stages of the sale process, and the rest will be sold before the end of 2021. Petrobras could have sold even more oil to China this year, he said.“There is enough room to export more to China. It depends on our production capacity,” he said. “China will continue to be a large client for Petrobras.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Exxon Mobil Corp.’s impending writedown of natural gas fields rounds out a record year for Big Oil chargeoffs stemming from misplaced optimism on the future of fossil fuels.The five Western supermajors have now identified more than $70 billion of asset impairments this year, by far the most in at least a decade. The pandemic-induced crash in energy markets has forced companies to lower price forecasts and scale back drilling plans, severely reducing the value of their oil and gas resources.“Peak oil demand is more of a serious threat, though not a complete revamp in the business,” said David Doherty, an analyst at BloombergNEF in London. Big Oil is becoming “more realistic in their expectations for oil prices going forward.”This year’s writedowns exceed even the downturn of 2014-2016 not only because of the severity of the oil-price collapse but also due to the fact that it was driven by falling demand for petroleum, Doherty said. With consumers flying and driving less, the industry faces a greater degree of uncertainty than in previous slumps, which typically were triggered by excess supply rather than shrinking demand.The European supermajors used the 2020 crisis to revamp their business model with a pivot toward renewable energy, with BP Plc even pledging to reduce oil and gas production over time. By contrast Exxon and Chevron Corp., America’s largest oil companies, say they have little competitive advantage in the renewable space and are sticking with traditional fossil fuels for the long haul.Even so, the U.S. giants have severely pared back investment plans. Exxon reduced capital spending budget by one-third, or $10 billion, this year and spending will be significantly lower than pre-pandemic forecasts until 2025. Chevron made similar cuts and though it hasn’t provided long-term guidance, CEO Mike Wirth has made financial discipline his mantra.Brent crude dropped 0.8% to $47.23 a barrel at 10:54 a.m. in New York as OPEC and allied producers deliberated on whether to delay a production increase early next year.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.