(Editor's note: Additional financial
reporting information compiled by Bloomberg
By Stephany Romanow
The third-quarter financials for many international integrated
oil and gas companies are a mixed bag of economic news and
performance. Market conditions have changed
significantly from the same time last year. High oil
prices and rising operating costs have cut earnings for the
refining and petrochemical segments of the
Risks from social/political conditions and environmental accidents are also
taking a toll on balance sheets:
ExxonMobil, the biggest oil company by market
value, lifted production for the first time in more than two
years as net income slumped 18% on dwindling refining returns.
Exxons oil and natural gas output rose 1.5% to the
equivalent of 4.02 million bpd, the first increase since the
second quarter of 2011, according to data compiled by
Bloomberg. Crude prices also climbed, raising costs
and contributing to an 81% drop in profit at the companys
Profit from processing crude into fuels fell to $592 million
during the quarter from $3.19 billion (B) a year earlier,
according to the companys statement. Returns from oil and
gas sales rose 12% to $6.7 B and chemical profit climbed 30% to
US profit margins from refining oil into products such as
gasoline and diesel declined 43% to an average of $17.54/bbl
during the July-to-September period as the cost of US crude feedstocks rose. It was the first
time that the average quarterly spread fell below $20 since
late 2010, according to data compiled by Bloomberg.
The company has been processing output from its Kearl oil-sands
development in western Canada at plants in Joliet, Illinois;
Baton Rouge, Louisiana; and Sarnia, Ontario, according to David
Rosenthal, vice president of investor relations. Some of the
Kearl production has been sold to other refiners, he
ExxonMobil CEO Rex Tillerson is seeking to revive production
growth and curb cost increases amid stagnant energy demand in
the worlds largest economy and shrinking access to the
worlds remaining untapped crude reservoirs. The
companys growth prospects include gas-export developments
in Australia and Papua New Guinea, oil-sands production in
western Canada and Arctic forays in Russia.
Tillerson has been telling investors and analysts since March
that output from Exxons wells will decline by 1% this
year before new projects boost production as much as
3% annually through 2017.
ROYAL DUTCH SHELL
Royal Dutch Shell Plc, Europes biggest oil company,
said third-quarter earnings missed analyst estimates as
production and profits at refineries dropped. Profit excluding
one-time items and inventory changes fell 32% to $4.5 B from
$6.6 B a year earlier.
Oil and gas production dropped 2% worldwide because of
disruptions in Nigeria and margins at oil refineries fell in
the third quarter because of overcapacity in Europe, where fuel
demand is falling. CEO Peter Voser, who steps down at the end
of the year, said Shell would cut net spending next year by
increasing the pace of asset sales.
We are facing headwinds from weak industry refining
margins, and the security situation is Nigeria, Voser
said Shell has a strong project flow in place for 2014
The companys earnings from refining and marketing almost
halved to $892 million in the third quarter from a year ago,
Shell said. The company pumped 2.931 million barrels of oil
equivalent a day (boe/d) in the quarter, about 2% lower than a
year earlier, amid production interruptions in Nigeria. Net
income fell 35% to $4.7 B.
Profits were reduced by $300 million by the deteriorated
security situation onshore Nigeria and a blockade of Nigeria
LNG, it said today. Shell also took a $176 million net
charge in the quarter, predominantly related to various
offshore properties in North America.
Shells refining head, Ben van Beurden, will succeed Voser
next year. Among the large-scale projects, he will take on is
the Libra field off Brazil, won by the company and its partners
this month. Shell has forecast net capital expenditure of about
$40 B this year and plans to invest as much as $130 B in
Van Beurden will also seek to restore profit at Shells
North American operations. Shell started selling US shale
assets after booking a $2.1-B impairment this year. Shell in
August scrapped a 4 million-bpd target for total output in
Shell took over the Coulomb North field project, which is
pumping about 10,000 boe/d in the Gulf of Mexico, according to
the company. It sold its interest in the downstream business in
Ghana. Shell will proceed with the Carmon Creek project in
Alberta, Canada, the company said in a separate statement. The
project is expected to produce as much as 80,000 bbl.
BP Plc, Europes third-largest oil
company, raised its dividend after third-quarter earnings fell
less than expected. Profit adjusted for one-time items
and inventory changes dropped to $3.7 B from $5 B a year
earlier, the London-based company said in a statement.
CEO Bob Dudley is trying to return BP to growth after divesting
more than $60 B in assets in the wake of 2010 Gulf of Mexico
oil spill. While BP still faces billions of dollars in fines
and settlement payouts, Dudley is bolstering dividends and
buybacks to gain investor confidence as the shares languish
about 30% below the pre-spill level.
The company will sell a further $10 B of assets by the end of
2015 and give most of the proceeds to shareholders, favoring
buybacks. BP is already about halfway through an $8 B buyback
program, funded by a deal in which it sold its half of Russian
venture TNK-BP and took a 20% stake in OAO Rosneft, the
countrys biggest oil producer.
Reported output will drop as disposals shave off 150,000 bpd.
Production was 3.17 million boe/d in the third quarter.
Excluding Russia, output was 2.3% lower than a year earlier at
2.2 million bpd following asset sales. Adjusting for disposals,
volumes rose 3.4% on higher output from fields in the North Sea
Brent crude prices averaged $109.65/bbl in the period, just 23
cents higher than a year earlier, while BPs refining marker margin, a generic
measure of profitability, dropped to $13.62/bbl from $23.15.
Profit from BPs refining arm plunged to $1 B from $3.4
Capital expenditure this year will be $24 B to $25 B and stay
at that level next year. It will range from $24 B to $27 B
through 2020 according to BP. The ratio of net debt to net debt
plus equity was 13.3% at the end of the third quarter, while
the effective tax rate was 31%.
While Dudley is trying to keep a lid on spending, the company
is increasing investment in exploration.The company cut that
figure to $9.2 B and said that $19.3 B of the $20 B trust fund
it set up after the spill has been paid out or assigned.
Separately, BP is in the middle of a three-phase trial with the
US government over liability for the spill, which may lead to
as much as $17 B in fines under the Clean Water Act. The
trials final stage probably will not start until next
year. BP today adjusted its provision for the disaster to $42.5
ConocoPhillips, the largest US independent oil and natural gas
producer, increased third- quarter profit 38% after selling
assets. The company has been overhauling its business since
announcing in 2009 a plan to sell assets and boost returns. It
had a gain of $749 million in the quarter from disposals
including the Clyden oil-sands lease in Canada and a midstream
holding in Trinidad and Tobago. The company closed the sale of
its stake in the Kashagan project in Kazakhstan for about $5.4
The explorer is looking to areas such as the Eagle Ford and
Bakken formations in the US to increase oil output, and it has
projects planned in locations such as Canada and the North Sea.
ConocoPhillips spun off the refining, chemical and pipeline
assets as Phillips 66 in April 2012.
Third-quarter production from continuing operations was the
equivalent of 1.47 million bpd, the same as a year earlier. The
company trimmed its daily forecast on that basis for all of
2013 to a range of 1.505 million bbl to 1.515 million bbl,
compared with an earlier estimate of as much as 1.53 million
ConocoPhillips said its fourth-quarter production forecast is
unchanged, except for about 50,000 boe/d in disruptions in
Libya. Revenue rose 5.1% from a year earlier to $15.5 B in the
Chevron Corp., the second-largest US energy producer by market
value, said shrinking refining profit eroded gains from higher
oil prices and the companys biggest production increase
Profit from processing crude oil into fuels tumbled 45% during
the third quarter to $380 million amid rising feedstock costs and repairs at a
California plant that crimped gasoline and diesel output. The
refining slowdown overshadowed a 2.7% rise in oil and natural
gas production led by fields from Kazakhstan to
Chevron posted net income of $4.95 B compared with $5.25 B a
year earlier, according to the company.
Chairman CEO John S. Watson is spending $36.7 B in a push to
raise oil and natural gas production that for the first nine
months of this year has lagged his full-year goal of pumping
the equivalent of 2.65 million boe/d. The third-quarter output
boost was the largest since mid-2010.
Total SA, Europes second-largest oil producer, reported a
19% decline in third-quarter profit as refining margins in
Profit, excluding changes in inventories, fell to 2.72 B euros
($3.7 B) from 3.36 B euros a year earlier, the Courbevoie,
France-based company said. Production advanced 1% to 2.3
million boe/d after Total resumed output at the North Sea Elgin
platform and the Ibewa field in Nigeria. New fields were
started in Kazakhstan and Norway.
The refining environment remains very difficult
right now, Chief Financial Officer Patrick de la
Chevardiere said on a conference call. Margins are
extremely weak, we still have an endemic problem of
overcapacity in Europe.
Total has pledged to boost production to reach 2.6 million
boe/d in 2015 and about 3 million boe/d two years later. The
French company has also promised to explore more aggressively
for new deposits and start up almost twice the number of projects in the next three years
than the previous three.
The group is improving the outlook for sustainable
post-2017 production growth under terms consistent with its
strict return criteria while confirming its commitment to
reduce near-term investment, CEO Christophe de Margerie
said in the statement.
Total wrote down the value of US assets for about $500 million
due to a lower natural gas prices and another $200 million for
Syrian assets that the company has little chance of
recovering, according to de la Chevardiere.
De Margerie had promised output growth of 2% to 3% this year.
We are expecting an increase in 2013, he said,
adding that the magnitude will depend on Kashagan and Angola
liquefied natural gas output. The drop in third-quarter results
was due in part to a 42% fall in adjusted net operating income
from refining and chemicals as well as an
increase in spending on exploration.
Total spent $400 million more in the most recent quarter on
exploration compared with the same period last year due to a
more aggressive push to uncover new deposit.
Total and partners won an auction earlier this month for the
Libra field, Brazils biggest crude discovery holding that
has as much as 12 B bbl of recoverable resources.
As Total develops so-called mega-projects, de Margerie is also
carrying out a series of asset sales to help pay for them.
About $15 B of assets will have been sold by the end of the
year as part of a target for $15 B to $20 B from 2012 to 2014,
de la Chevardiere said. The sale of a stake in the offshore
Nigerian Usan field along with one in its Congo operations
should be completed by the end of the year for a total of $3.5
B. He also confirmed a pledge that spending will peak this
year. Total expects capital expenditure to fall to $24 B to $25
B in 2015 to 2017 compared with $28 B to $29 B this year.
News reports from Bloomberg were used in the compilation of