EARNINGS WRAP: Big refiners reap Q1 benefits from higher oil prices, margins

(Editor’s note: With the first-quarter earnings season nearing its close, HP is recapping the results from major market players in various segments. For a look at petrochemical results, click here.)

The first quarter of 2011 was a boon for many US and global refiners, as higher oil and gasoline prices led to sharply higher margins.

Crude values were up more than 30% on a year on year basis, as political unrest in the Middle East and North Africa pushed prices higher throughout the quarter.

Even BP, which recorded a $400mn pretax charge for 2010 oil spill costs, posted a year-on-year profit – despite the fact that the first quarter a year ago was before the spill.

Here’s a rundown of how some of the top industry players performed.

ExxonMobil refineryNet income for ExxonMobil, the largest US oil company, rose 69% to $10.7 billion as sales jumped 26% to $114 billion.

Oil-equivalent production was up more than 10% from the prior year’s quarter, the company reported.

It was the fifth consecutive quarter in which ExxonMobil posted an increase.

The company’s earnings reflected “continued leadership in operational performance during a period of strong commodity prices,” chairman Rex Tillerson said.

Earnings for Chevron, the No. 2 US oil company, were $6.2 billion – 36% above the $4.6 billion earned a year earlier.

Upstream earnings were $5.98 billion, up 27% from $4.72 billion last year.

The higher earnings came despite reduced production, which dropped to 2.76mn bpd from 2.78mn bpd a year ago, including a 5.4% fall in US volumes.

Meanwhile, ConocoPhillips – the No. 3 US oil firm - saw first-quarter earnings jump 44% to $3.03 billion, with the company noting that oil and natural gas liquids prices rose 27% in the quarter to $91.55/bbl.

That helped offset a 25% reduction in production to 1.7m bbl/day, said ConocoPhillips, which has sold assets to focus on developing oil fields in North America.

Revenues increased by 27% to $58.2 billion.

By segment, exploration and production adjusted earnings were up 15% to $2.2 billion, while refining and marketing profits were $482mn – up from only $21mn a year earlier.

The company said it hadn’t seen higher retail fuel prices impacting demand.

Valero refineryValero, the largest US crude refiner, earned a profit in its first quarter for the first time since 2009 as the gap between oil costs and fuel prices more than doubled.

The company’s net income was $98mn, compared with a loss of $113mn in the year-earlier period.

Sales for the company jumped 42% to $26.3 billion.

Analysts said Valero was benefitting from strong margins at its refineries in the US Midwest, which had an easier access to the storage hub in Cushing, Oklahoma.

WTI has traded at a discount to imported Brent for much of 2011, as a bottleneck at Cushing has constrained the flow of oil to US Gulf refineries.

However, Valero’s Midwest refineries can more easily access Cushing, allowing it to benefit from cheaper crude.

Valero said it processed 2.1mn bpd of crude in the first quarter, up 8.6% from 1.9mn bpd a year earlier.

Marathon Oil reported a first-quarter profit of $996mn, more than doubling the $457mn it made in the 2010 first quarter amid stronger commodity prices and improved margins.

Earnings in Marathon’s exploration and production (E&P) business jumped by 33% to $668mn on increased prices for liquid hydrocarbons and 11% higher sales, with growth in the Gulf of Mexico and Norway offsetting production issues in Libya, the company reported.

The Houston-based firm said its oil and gas output for the quarter was 400,000 bpd, up from 361,000 bpd a year earlier.

Meanwhile, Marathon’s refining, marketing and transportation segment swung to a $527mn profit – a dramatic reversal from a $237mn loss in the 2010 period.

The positive earnings trend continued on a global basis, with Royal Dutch Shell posting profit excluding one-time items of $6.3 billion – up 31% from $4.8 billion in the 2010 first quarter.

Shell reported that its refining profit more than doubled to $1.65 billion.

“The recent increase in oil prices clearly demonstrates the interdependence of global energy suppliers and consumers, in an industry that needs sustained investment in diverse energy sources to meet customer demand,” said CEO Peter Voser.

Shell also said it was making good progress toward its plans of cutting costs and selling assets.

In the first quarter, Shell said it sold $3.2 billion in “non-core positions”, including tight gas assets in South Texas.

Even BP, which committed an aforementioned $400mn in a pretax charge for the oil spill, registered a profit of $7.2 billion, 16% above the $6.2 billion posted a year earlier.

Revenues increased 18% to $88.3 billion.

Like Chevron and ConocoPhillips, BP has reported lower production levels in recent months, as spill costs forced it to sell oil fields and refineries and the US banned further Gulf of Mexico drilling.

However, higher prices coupled with the company’s asset sales have outweighed costs from the spill, allowing BP’s profit to rise year on year.

Stay tuned to the HPInformer blog next week for a similar earnings recap of the global construction segment.

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