Oil and gas firms' first-quarter results improved on higher oil prices

US producers

ExxonMobil Corp. reported estimated first-quarter earnings of $4 billion compared with $1.8 billion in first-quarter 2016, resulting from improvements in commodity prices, cost management, and refining operations.

The supermajor's first-quarter upstream earnings were $2.3 billion compared with a loss of $76 million in first-quarter 2016. Higher liquids and gas realizations increased earnings by $2.3 billion. Lower volume and mix effects decreased earnings by $150 million. All other items, including lower expenses, increased earnings by $170 million.

On an oil-equivalent basis, production of 4.2 million b/d was down 4% from first-quarter 2016 because of lower entitlements and higher maintenance activity mainly in Canada and Nigeria. Natural gas production of 10.9 bcfd increased 0.184 bcfd from 2016 as project ramp-up was partly offset by field decline.

US upstream earnings were a loss of $18 million compared with a loss of $832 million in first-quarter 2016. Non-US upstream earnings were $2.3 billion, up $1.5 billion from the previous year.

During the quarter, ExxonMobil completed the acquisitions of InterOil Corp. and companies with oil and gas properties primarily in the Permian basin. ExxonMobil and Eni SPA signed a sale and purchase agreement to enable ExxonMobil to acquire 25% indirect interest in the natural gas-rich Area 4 block offshore Mozambique for $2.8 billion.

ExxonMobil's downstream earnings were $1.1 billion, up $210 million from first-quarter 2016 because of higher margins and higher volume and mix effects. Chemical earnings reached $1.2 billion but were $184 million lower than in first-quarter 2016 because of weaker margins.

Chevron Corp. reported earnings of $2.7 billion for this year's first quarter compared with a loss of $707 million in first-quarter 2016. Included in the 2017 first quarter was a gain of $600 million from the sale of the Indonesia geothermal business.

Chevron's worldwide net oil-equivalent production was 2.68 million b/d in this year's first quarter compared with 2.67 million b/d in first-quarter 2016. The company's US upstream operations earned $80 million in this year's first quarter compared with a loss of $850 million in first-quarter 2016. International upstream operations earned $1.4 billion in this year's first quarter compared with a loss of $609 million in the same quarter a year ago.

Chevron's US downstream operations earned $469 million in the first quarter compared with earnings of $247 million in first-quarter 2016. The increase was mainly because of the absence of an asset impairment in first-quarter 2016, decreased planned turnaround activity, and higher margins. The firm's international downstream operations earned $457 million in this year's first quarter compared with $488 million in the same quarter a year ago. The decrease was primarily because of lower refining margins.

Devon Energy Corp.'s oil production averaged 261,000 b/d, a 7% increase compared with fourth-quarter 2016. The strong growth in oil production was driven entirely by Devon's US resource plays, where the company is attaining the highest margins within its portfolio. Total US oil production reached 123,000 b/d in the first quarter, a 17% increase compared with the previous quarter. The robust production growth was largely attributable to higher completion activity across the company's Eagle Ford and STACK operations.

Marathon Oil Corp. reported a net loss of $4.957 billion for this year's first quarter including a noncash, aftertax impairment charge of $4.962 billion from discontinued operations. The adjusted net loss was $57 million for this year's first quarter compared with an adjusted net loss of $317 million for the previous year's first quarter.

During the first quarter, Marathon Oil announced acquisitions of 91,000 net surface acres in the Permian basin for $1.8 billion and divestiture of its Canadian oil sands assets for $2.5 billion.

The company's production for the quarter averaged 338,000 boe/d, including 8,000 boe/d from Libya. North American production averaged 208,000 net boe/d. North American production expenses were down 20% from the same quarter a year ago.

EOG Resources Inc. reported first-quarter net income of $28.5 million compared with a net loss of $471.8 million in first-quarter 2016. EOG set a company record for crude oil volumes in this year's first quarter by producing 315,700 b/d, an 18% increase compared with first-quarter 2016.

The company defined premium inventory as prospective well locations that will earn a minimum 30% direct aftertax rate of return at $40/bbl crude oil and $2.50/Mcf gas prices.

EOG continues to reduce total well costs in each of its major plays. It's first-quarter average completed well costs were 6% lower than full-year 2016 averages in the Eagle Ford, Delaware basin, and Bakken using normalized lateral lengths.

"For all three plays, the overall cost reductions were achieved in spite of service and equipment price inflation in certain areas, which were more than offset by continued advances in drilling and completion tools and techniques, benefits from extended lateral lengths, and new contracts at lower prices," EOG said.

Anadarko Petroleum Corp. reported a first-quarter net loss of $275 million compared with a net loss of $998 million for the same quarter in 2016. The company's adjusted net loss was $330 million compared with an adjusted net loss of $569 million a year ago. Capital expenditures totaled $1.25 billion for this year's first quarter, up from $896 million in the same quarter last year.

During this year's first quarter, Anadarko continued to accelerate drilling activity in the US onshore. The company achieved an all-time high for oil sales volume of 31,000 b/d in the Delaware basin. The company added five operated rigs during the quarter and has added one more subsequent to quarter-end, bringing the total number of operated rigs to 15 in the Delaware basin. In the DJ basin, Anadarko's sales volume averaged 242,000 boe/d. The company added 1 rig, bringing its total operated rig count to 6, all drilling multiwell development pads.

In the deepwater Gulf of Mexico, Anadarko's sales volume more than doubled year-over-year to 160,000 boe/d, reflecting the benefit of the December 2016 property acquisition from Freeport-McMoRan and the continued strong performance at Lucius and Caesar-Tonga. Internationally, the company increased sales volume by 17% year-over-year, driven by oil volumes from the TEN project offshore Ghana, which started oil production in August 2016.

Hess Corp.'s net loss for this year's first quarter was $324 million compared with a net loss of $509 million in first-quarter 2016. The company's E&P net loss in this year's first quarter was $233 million compared with a net loss of $453 million in first-quarter 2016. E&P capital and exploratory expenditures were $393 million during the first quarter, down 28% from $543 million in the same quarter a year ago.

Excluding production from Libya, Hess's net production in the first quarter was 307,000 boe/d compared with 350,000 boe/d in first-quarter 2016. Lower volumes were due to a reduced drilling program, natural field declines, and lower entitlement in Asia. Net production in Libya, which recommenced in fourth-quarter 2016, was 4,000 boe/d in this year's first quarter.

Hess's net production from the Bakken area averaged 99,000 boe/d. The company operated an average of 2 rigs in the first quarter, drilling 11 wells and bringing 8 new wells online. A third rig was added in March and a fourth rig was added in April. Hess plans to end the year with 6 rigs in the Bakken area.

The company's net production from the Gulf of Mexico was 66,000 boe/d compared with 69,000 boe/d in the same quarter a year ago primarily because of lower production from Conger and Shenzi fields.

Refiners

Valero Energy Corp. reported net income of $321 million in this year's first quarter, down from $513 million in first-quarter 2016. However, after excluding noncash benefits from a lower of cost or market (LCM) inventory valuation adjustment, which positively impacted 2016 first-quarter income, operating income in this year's first quarter increased $1 million from a year ago.

Valero's refining segment's adjusted operating income decreased $5 million from a year ago, with the $72 million increase in refining gross margin being more than offset by the $77 million increase in operating expenses. The higher operating expenses were attributed to higher natural gas prices and maintenance costs.

Valero's refineries achieved 91% throughput capacity utilization and averaged 2.8 million b/d of throughput volume in this year's first quarter, which was in line with first-quarter 2016. The company's capital investments totaled $641 million in this year's first quarter, of which $245 million was for turnarounds and catalyst.

HollyFrontier Corp. posted a first-quarter net loss of $37.8 million compared with net earnings of $43.4 million during the same quarter in 2016. Excluding special items, net loss for the current quarter was $33.5 million vs. a loss of $10 million in first-quarter 2016.

This decrease, the company said, was driven by lower product sales because of maintenance at the El Dorado, Tulsa, and Navajo refineries, as well as the crude supply pipeline outage to the Woods Cross refinery.

Tesoro Corp. reported first-quarter net income of $87 million compared with net income of $109 million for the same quarter in 2016. The decrease was primarily because of higher interest costs of $29 million and increased general and administrative expenses in this year's first quarter, partially offset by increased refining and margins.

Tesoro's gross refining margin increased $161 million during this year's first quarter because of the $147 million LCM adjustment recorded in the same quarter in 2016. The Tesoro Index was $12.4/bbl during the first quarter with a gross refining margin of $701 million, or $9.44/bbl. This compares with the Tesoro Index of $12.15/bbl with a gross refining margin of $540 million, or $7.59/bbl, in first-quarter 2016.

Other than the LCM impact in first-quarter 2016, the year-over-year increase in gross refining margins reflects favorable market conditions and better operating performance. Total refinery throughput for the quarter was 92% utilization compared with 89% utilization for the same quarter in 2016.

Phillips 66 Co. reported first-quarter earnings of $563 million for this year compared with earnings of $398 million in the same quarter in 2016. First-quarter earnings included the net benefit of a gain on consolidation of a petroleum coking venture and an impairment taken by an equity affiliate. Excluding these items, adjusted earnings for this year's first quarter were $294 million.

Marathon Petroleum Corp. reported net earnings of $101 million for this year's first 3 months compared with a net loss of $78 million in the same quarter a year ago. MPC's first-quarter results reflect solid contributions from its marketing and midstream segments offsetting weak product price realizations and substantial turnaround activity in the refining and marketing segment. The turnaround activity for the quarter was the largest in MPC history, the company said.

Canadian firms

All financial figures in this section are presented in Canadian dollars unless noted otherwise.

Suncor Inc. recorded net earnings of $1.35 billion in this year's first quarter compared with net earnings of $257 million in first-quarter 2016. First-quarter operating earnings were $812 million compared with a $500-million operating loss in the prior year's first quarter.

The company's total upstream production was 725,100 boe/d in this year's first quarter compared with 691,400 boe/d in first-quarter 2016, attributable to the additional 41.74% ownership interest in Syncrude acquired during 2016 and increased E&P production, partially offset by the incident at Syncrude's Mildred Lake facility that occurred late in the first quarter.

Oil sands production was 448,500 b/d in this year's first quarter compared with 453,000 b/d in first-quarter 2016. Production volumes in E&P increased to 134,500 boe/d in this year's first quarter compared with 125,600 boe/d in first-quarter 2016, primarily because of production from new wells at Hibernia and reservoir optimization at Terra Nova, partially offset by natural declines at Buzzard field.

Average refinery throughput increased to 429,900 b/d compared with 420,900 b/d in first-quarter 2016 because of lower planned maintenance and improved performance at the Edmonton and Montreal refineries in this year's first quarter. Average refinery utilization in the first quarter improved to 93% from 91% in first-quarter 2016.

Imperial Oil Ltd.'s net earnings for this year's first quarter were $333 million compared with a net loss of $101 million for first-quarter 2016. The improvement reflects higher global crude prices and a $151-million gain on property sales.

The company's upstream recorded a net loss in the first quarter of $86 million compared with a net loss of $448 million in the same period of 2016, reflecting higher crude prices, partially offset by higher royalties, lower production volumes, and higher operating expenses.

Impacted by a fire at the Syncrude Mildred Lake upgrader in mid-March, the company's first-quarter production averaged 378,000 boe/d compared with 421,000 boe/d in the same period of 2016. Kearl production of 182,000 b/d (129,000 b/d Imperial's share) represented the third consecutive quarterly increase following the Alberta wildfires in second-quarter 2016.

Downstream net income was $380 million in the first quarter compared with $320 million in the same quarter in 2016. Earnings increased mainly due to a gain of $151 million from the sale of former refinery lands in Mississauga, Ont., partially offset by lower marketing margins. Refinery throughput averaged 398,000 b/d and refinery capacity utilization was 94%, both unchanged from the same period in 2016. Chemical net income was $45 million in the first quarter compared with $49 million in the same quarter in 2016.

Canadian Natural Resources Ltd. reported first-quarter net earnings of $245 million compared with a loss of $105 million in the same quarter a year ago. Production averaged 876,907 boe/d, an increase over the 844,531 boe/d produced in first-quarter 2016.

The Horizon oil sands mining and upgrading project produced 192,491 b/d, a 50% increase. Horizon Phase 3 expansion reached 92% physical completion at the end of the quarter and startup is targeted for the fourth quarter. Production from thermal in-situ operations increased 9% from first-quarter 2016. The Kirby South steam-assisted gravity drainage project had average production of 37,311 b/d, while Primrose produced 91,061 b/d.

Pelican Lake polymer flood production of 46,617 b/d was 2% below both fourth-quarter 2016 and first-quarter 2016 due to natural declines and planned downtime for wellbore cleanouts. CNRL drilled 167 net wells in North America in the most recent quarter vs. only 12 in the same quarter in 2016.

Cenovus Energy Inc. ended the first quarter with net earnings of $211 million compared with a net loss of $118 million in the same quarter a year ago. During first quarter the company acquired assets in Alberta and British Columbia from ConocoPhillips for $17.7 billion. The agreement included ConocoPhillips's 50% interest in FCCL Oil Sands Partnership Co. as well as its Deep basin assets (OGJ online, Mar. 30, 2017). The transaction closed in May.

In this year's first quarter, the ramp-up of the Christina Lake Phase F and Foster Creek Phase G expansion projects continued as expected. Incremental volumes from the new phases contributed to first-quarter oil sands production, net to Cenovus, of more than 181,000 b/d, a 32% increase from the same period in 2016. The expansions increased the company's total oil sands production capacity by 26% to 390,000 b/d. Meanwhile, conventional oil production and natural gas production decreased 10% and 11%, respectively, in this year's first quarter compared with the same quarter a year ago, primarily because of natural declines.

The refineries' financial performance in this year's first quarter improved compared with the same quarter in 2016, mostly because of a 20% increase in the average 3-2-1 Chicago market crack spread, which was partially offset by lower crude oil runs and refined product output due to planned turnarounds.

TransCanada Corp. reported consolidated net income for this year's first quarter of $774 million compared with net income of $354 million for first-quarter 2016. Comparable earnings for this year's first quarter were $698 million vs. $494 million for the same quarter in 2016.