Industry 2Q earnings, jobs dissolve amid continued oil-price slump

A difficult year thus far for the integrated, multinational oil and gas firms caused by low oil prices has been somewhat eased by improved production and better refining margins. However, overall earnings and spending are down, and in the case of Royal Dutch Shell PLC, conditions are resulting in job cuts.

Shell reported second-quarter earnings on a current cost of supplies (CCS) basis of $3.4 billion, down from $5.1 billion for the same quarter a year ago. Second-quarter CCS earnings excluding identified items were $3.8 billion, compared with $6.1 billion for second-quarter 2014, representing a decline of 37%.

The company’s oil and gas production during the quarter totaled 2.73 million boe/d, down 11% from second-quarter 2014.

Shell now plans 2015 capital investment of $30 billion, trimming $3 billion since the company’s last update in April (OGJ Online, Apr. 30, 2015), and $7 billion from 2014 levels, reflecting cost reductions, project cancellations, and rephasing of growth options. Overall it’s a reduction of 20% from 2014 levels, and 35% compared with 2013.

As a result, the company says it expects to cut 6,500 staff and direct contractors during the year.

Shell also noted that it remains on track for completion of its merger with BG Group PLC in early 2016. BG reported second-quarter revenue and other operating income of just under $4 billion, down 28% year-over-year. BG says the impact of lower prices was partly offset by exploration and production volumes rising 19% to 703,000 boe/d and LNG delivered volumes rising 17% to 3.6 million tonnes.

BG now expects 2015 E&P production volumes to be in the upper half of the 650,000-690,000 boe/d range, excluding any changes to its portfolio.

BP pays for gulf spill

BP PLC recorded an underlying replacement cost profit for the second quarter totaling $1.3 billion, half of the $2.6 billion during the previous quarter and down from $3.6 billion in second-quarter 2014.

Due to a $10 billion charge related to the cumulative pretax charge associated with the Deepwater Horizon incident and spill (OGJ Online, July 2, 2015), along with other nonoperating items and fair value accounting effects, the company reported a replacement cost loss for the quarter of $6.3 billion.

BP took a charge of $10.8 billion in total during the quarter related to the spill. The total cumulative pretax charge for the incident is now $54.6 billion.

The company’s organic capital expenditure in the quarter was $4.5 billion, bringing the total for the first half of the year to $8.9 billion. Full-year organic capital expenditure is now expected to be fewer than $20 billion. BP has also now agreed on $7.4 billion of divestments towards the current $10 billion divestment program.

The company’s overall reported oil and gas production, including Russia, was 3.1 million boe/d during the quarter. Excluding Russia, reported production of 2.1 boe/d was the same as second-quarter 2014 and underlying production was 1.7% lower, mainly due to increased turnaround activity, partly offset by the ramp-up of production from projects that started-up in 2014.

Other European integrated declines

Total SA posted second-quarter adjusted net operating income from its business segments of $3.3 billion, down 13% compared with the second quarter 2014.

During the half, the company’s adjusted net operating income totaled $6.1 billion, down 19% compared with first-half 2014. Its adjusted net income totaled $3.1 billion in the second quarter, compared with $3.2 billion in second-quarter 2014, representing a decline of 2%.

Total’s hydrocarbon production during the quarter totaled 2.3 million boe/d, up 12% compared with second-quarter 2014.

Eni SPA recorded a second-quarter adjusted operating profit excluding subsidiary Saipem SPA of $1.6 billion, down 41% year-over-year. Its adjusted operating profit was $830 million, down 72% from last year’s second quarter.

The company’s adjusted net profit excluding Saipem for the quarter was $490 million, down 46% year-over-year. Its adjusted net profit was $152 million, down 84% from last year’s second quarter.

The company’s production totaled 1.8 million boe/d, up 10.7%. Excluding positive price effects, production increased 7.1%. Production is expected to rise 7% for the year, driven by continuing new field start-ups and ramp-ups in 2014 mainly in Venezuela, Norway, the US, Angola, and Congo (Brazzaville), as well as projections of higher volumes in Libya.

Eni forecasts a moderate strengthening in global economic growth in 2015 driven by the US. It notes, however, that certain risks have the potential to mitigate that outlook. Uncertainty remains around the strength of the Eurozone recovery, the extent of the slowdown of the Chinese economy and other emerging economies, as well as the extent of stability in financial markets.

The company says it plans to implement capital project optimization and rescheduling that will reduce expenditure compared with 2014 levels, excluding the impact of the US dollar exchange rate.

Repsol SA posted a second-quarter adjusted net income of $341 million, down from $426 million a year earlier. The company’s production increased year-over-year to 525,000 boe/d from 338,000 boe/d due to the acquisition of Talisman Energy Inc. earlier this year (OGJ Online, Feb. 19, 2015).

Statoil ASA took a second-quarter net income of $1.5 billion, compared with $1.8 billion in the same period in 2014. The gain from the divestment of the Shah Deniz project and the South Caucasus Pipeline was $1.8 billion.

The company’s adjusted earnings were $3.3 billion, compared with $4.7 billion in the same period in 2014. Statoil reported production during the quarter of 1.9 million boe/d, up 4% compared with the same period in 2014.

More job cuts in Canada

Cenovus Energy Inc. recorded net earnings of $126 million for the second quarter, compared with $615 million in second-quarter 2014. The company had net earnings of $126 million for the quarter, compared with $615 million in the year ago quarter.

The Calgary-based company says it’s increasing its cost-cutting expectation for 2015 to $280 million, 40% higher than its initial target. Cenovus also reported that it expects to cut 300-400 positions at the company’s Calgary offices before yearend. The company previously cut 800 jobs at the beginning of the year. Additional staff reductions at its field operations are being planned for early 2016.

Suncor Energy Inc., which cut 1,000 jobs at the beginning of the year (OGJ Online, Jan. 14, 2015), recorded second-quarter operating earnings of $906 million, compared with $1.1 billion in the prior year quarter. Net earnings were $729, compared with net earnings of $211 million last year, which included impairment charges.

The company's total upstream production during the quarter totaled 559,900 boe/d, compared with 518,400 boe/d in the prior year quarter.

Suncor is cutting planned capital expenditures to $5.8-6.4 billion from $6.2-6.8 billion after reevaluating nonessential projects as part of the company's cost reduction initiatives and overall approach to capital discipline.

Rough times for Chevron

Chevron Corp. reported earnings of $571 million, compared with earnings of $5.7 billion in the 2014 second quarter. Net production of 730,000 boe/d in second quarter was up 63,000 b/d, or 9%, from a year earlier.

“Multiple efforts to improve future earnings and cash flows are under way,” explained John Watson, Chevron chairman and chief executive officer. “We’re getting our cost structure down, through renegotiations across the supply chain and by sizing our contractor and employee workforce to reflect lower activity levels going forward.

“We’re actively managing to a smaller capital program, as projects currently under construction come online and as potential new projects are paced and rebid. In addition, our 4-year divestment program is ahead of pace,” Watson said.

ExxonMobil Corp. recorded estimated second-quarter earnings of $4.2 billion, down 52% compared with $8.8 billion a year earlier.

The company produced 4 million boe/d, an increase of 139,000 b/d, or 3.6%. Liquids volumes of 2.3 million b/d increased 11.9%, benefiting from new developments in Angola, Canada, Indonesia, and the US.

US firms take losses

ConocoPhillips reported a second-quarter net loss of $179 million, compared with second-quarter 2014 earnings of $2.1 billion. Excluding special items, second-quarter adjusted earnings were $81 million, compared with second-quarter 2014 adjusted earnings of $2 billion.

Production from continuing operations, excluding Libya, for the quarter was 1.6 million boe/d, up 39,000 boe/d compared with the same period a year ago. The net increase reflects 69,000 boe/d, or 4% growth, after adjusting for 30,000 boe/d from dispositions and downtime.

The company says it’s on track to reach the higher end of its 2015 production target of 2-3% growth over 2014 production from continuing operations, excluding Libya. Third-quarter production, excluding Libya, is expected to average 1.51-1.55 million boe/d, reflecting planned turnaround activity during the quarter.

The company has cut its 2015 capital expenditures guidance from $11.5 billion to $11 billion. Guidance for operating costs has been reduced to $8.9 billion from $9.2 billion and the corporate segment net expense has been reduced to $900 million from $1 billion.

Hess Corp. posted an adjusted net loss, which excludes items affecting comparability, of $147 million compared with adjusted net income of $432 million in second-quarter 2014. On an unadjusted basis, the company reported a net loss of $567 million for the quarter, including a noncash goodwill impairment charge of $385 million, and net income of $931 million in the prior-year quarter.

Contact Matt Zborowski at matthewz@ogjonline.com.

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